Harvard Law Prof: Big Tax on AIG Bonuses Could Be Constitutional
Harvard law professor Laurence Tribe says a high tax on bonuses paid to executives by companies receiving bailout funds could likely be structured in a way to avoid constitutional problems.
Some proposals are circulating to tax bonuses at rates varying from 70 percent to 100 percent as a way to recoup the $165 million paid to executives at AIG, the Wall Street Journal (sub. req.) reports.
One issue is whether such a bill violates the Constitution’s ban on Bills of Attainder that punish a person or group without a trial. Tribe told the Wall Street Journal that Congress could avoid that constitutional problem with a broad bill that doesn’t target “a closed class of named executives.” Also blunting any Bill of Attainder challenge would be the fact that the aim of the tax is fiscal rather than punitive, and it would apply in the future as well as retroactively, Tribe wrote in a summary posted at the Atlantic.
Another issue is whether retroactive taxes violate the ex post facto clause. Actually, it’s a nonissue, Tribe says. “The ex post facto clause applies exclusively to criminal punishment and poses no difficulty here,” Tribe told the Wall Street Journal Law Blog.
Tribe also addressed whether the law would violate the contracts clause, the takings clause and the due process clause in the Wall Street Journal Law Blog interview. He saw no problem. Many courts have ruled requirements for substantive due process are not violated if the legislation has a rational legislative purpose, “something nobody could deny in this instance,” according to Tribe.
The Wall Street Journal also points out that a tax rate approaching 100 percent is not unprecedented. The top federal income-tax rate was once 90 percent, and some excise taxes on specific transactions have hit 100 percent.
TaxProf Blog noted the articles and posted other relevant materials.
