Senate Leadership
March 18, 2009
Senate President Williams Proposes Surcharge on A.I.G. Bonuses
Calls bonuses ‘an affront to common decency’; seeks fairness for Connecticut taxpayers
Senate President Donald E. Williams, Jr. (D-Brooklyn) today introduced legislation that seeks a special 80-percent levy on some of the $165 million in “performance” and “retention” bonuses that were recently awarded to 400 A.I.G. insurance executives, despite that company having received more than $170 billion in taxpayer-funded bailouts.
The bill, “An Act Concerning The Income Tax Treatment Of Bonuses Received From Companies That Accept federal Economic Stimulus Funds,” seeks an 80-percent tax on that portion of taxable Connecticut income that any A.I.G. executive earns as a bonus and which was derived from any federal economic stimulus funds, including bailout money.
Sen. Williams said it “defies common sense” that bonuses ranging from $1,000 to $6.5 million have been paid to business executives who ran a century-old insurance company — once the 18th largest corporation in the world — into financial ruin.
“This is nothing sort of an affront to common decency, especially given the lean fiscal times we are facing,” Sen. Williams said. “The A.I.G. bailout is the largest federal bailout of a private company in United States history. The American people now own 80 percent of A.I.G. If we can’t recoup any of the $165 million in imprudent bonuses — and I know President Obama and Congress are trying to do that right now — perhaps the best way to make Connecticut taxpayers whole is to recoup most of that money through a special tax on those bonuses.
“There is a fundamental issue of fairness at play here,” Sen. Williams said. “These high-flying executives are among those who brought about the worst financial crisis in America since the Great Depression. To assume that these folks should be rewarded for steering our economy onto the rocks is ludicrous. State residents are being asked to make do with less on a state and local level, as well as in their own homes. People are being laid off. The Connecticut state budget is in crisis. It’s not A.I.G. fat cats who need a bailout — it’s the families of Connecticut who need help.”
“My understanding is the federal stimulus package should shore-up reeling businesses and restore them to bedrock solvency so rank-and-file residents have confidence in our economy going forward,” Sen. Eileen M. Daily (D-Westbrook), the Senate Chairman of the Finance, Revenue, and Bonding Committee, said. “These contemptible bonuses to elite executives undermine that entire premise; I think it’s entirely appropriate to levy a state tax on these bonuses and make the money available to improve the local economy to the benefit of all Connecticut residents.”
“A.I.G. has already earned its place in the bull’s-eye of Americans’ wrath by mismanaging a fortune and running into the ground an esteemed insurance industry giant, under the careless eye of the Bush administration,” Sen. Daily added. “Our proposed state tax would help keep A.I.G. on a short leash regarding its taxpayer-funded bailout, and signal our intention to work closely with the Obama administration to reverse the excesses of the past eight years.”
Sen. Williams’ proposal comes as A.I.G. CEO Edward M. Liddy was testifying in Washington today about the bonuses before the House Financial Services Committee. His proposal also comes as President Obama has directed Treasury Secretary Timothy Geithner pursue “every single legal avenue to block these bonuses.”
The bonuses have provoked bipartisan outrage across America, even prompting Sens. Max Backus (D-Montana) and Charles Grassley (R-Iowa), the Chairman and Ranking Member, respectively, of the Senate Finance Committee, to demand that the bonuses be subject to a 35-percent “excise tax” to be paid by A.I.G. for excessive compensation, and an additional 35 percent tax to be paid by each individual.
Yesterday, Republican lawmakers in the Connecticut General Assembly proposed re-writing a section of state law — the Connecticut Wage Act — that A.I.G. officials claim effectively forces them to pay the bonuses or face losing higher damages in the event of a successful lawsuit. Connecticut Attorney General Richard Blumenthal is reviewing that proposal.
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Senator Looney’s Derek Slap |
