WASHINGTON - Senate Republicans are applying the brakes to Democratic attempts to quickly tax away bonuses at the troubled insurance giant AIG and other bailed-out companies.
Sen. Jon Kyl, the Republicans' vote counter, blocked Democratic efforts Thursday evening to bring up the Senate version of the tax bill to recoup most of the $165 million paid out by American International Group Inc. last weekend and other bonuses in 2009. The House had swiftly approved its version of the bill earlier Thursday.
By rushing, Kyl said, Democrats were letting populist outrage trump informed decision-making in the Senate, which is supposed to be insulated from the pressures of public passion.
"I don't believe that Congress should rush to pass yet another piece of hastily crafted legislation in this very toxic atmosphere, at least without understanding the facts and the potential unintended consequences," he said. "Frankly, I think that's how we got into the current mess."
Senate Democrats said yesterday that they would try again next week to take up the tax bill and hope to complete it before April 4, when Congress leaves for a two-week spring break. But combining the disparate House and Senate versions of the bill in conference committee might have to wait until after the recess.
How to impose taxes on the bonuses without running afoul of the Constitution or the law is a dispute that has Republicans urging a go-slow approach. Doing so, of course, would drag out the Democratic discomfort over administration missteps and provide plenty of time for the GOP and others to question Treasury Secretary Timothy Geithner's performance. Treasury knew of the pending bonus payouts but did not block them.
Republican reluctance to the tax also appeals to a key constituency that finds regulation anathema: Wall Street.
Robert Willens, a corporate tax lawyer in New York, said yesterday that the Senate bonus tax bill would still allow bailout beneficiaries to negotiate higher salaries with employees to compensate for lost bonuses. The Senate bill authorizes the Treasury to issue regulations preventing firms from masking bonus payments as salaries, but it does not prevent firms from handing out raises.
"If the vast majority of bonuses become fixed salaries, that would harm the institutions because they would have higher fixed costs," Willens said.
The House bill would impose a 90 percent tax on bonuses paid after Dec. 31, 2008, by companies that have received more than $5 billion in government bailout money. The tax would not affect workers with adjusted gross incomes below $250,000.