Payback Time? House Approves Bonus Tax

March 19, 2009 — -- In a move to quell the growing outrage over the massive bonuses given to employees of companies such as AIG, the U.S. House of Representatives voted today to heavily tax the money doled out by large companies that took federal bailout money.

As they debated the bill, Democrats said enough is enough.

"The American people have said no, and they have said, 'Hell no, give us our money back,'" said Rep. Earl Pomeroy, D-N.D.

New York Democrat Charles Rangel said the companies need to "stop the thieving at taxpayers' expense."

"The only way to get their money back is to tax it back," said Rep. Steve Israel, D-N.Y.

Should the Names of Those Who Received Bonuses Be Made Public? Tell ABC News.

Approved 328 to 93, the bill would slap a 90 percent tax on the bonuses of any employee making more than $250,000 at any company that received federal bailout money.

However, the angriest voices today came from Republicans. They accused Democrats of making the bonuses possible.

"Listen, this bill is nothing more then an attempt for everyone to cover their butt up here on Capitol Hill," said House Minority Leader John Boehner, R-Ohio. "It's full of loopholes."

Rep. Jeb Hensarling, R-Texas, echoed the sentiment, telling his colleagues, "Don't come up with this political cover-your-backside language, trying to excuse all the people who are responsible for this in the first place."

Rep. Michele Bachmann, R-Minn., called the matter a "scandal that's brewing in Washington," and said, "We need to have answers."

At issue is a tiny provision in last month's stimulus bill that exempted contracts signed last year from limits on executive compensation. Call it the AIG loophole.

The loophole was part of measure written by Sen. Chris Dodd, D-Conn., but he told ABC News that it was the Treasury Department that pushed for it during closed-door negotiations with House and Senate leaders.

"I was not in the room," he said.

Geithner, Pelosi on Loophole

But House and Senate leaders were.

House Majority Leader Nancy Pelosi, D-Calif., told ABC News that the language in the measure "never came to the House side. ... It's a matter of absolute fact and record."

Asked if she opposed the final bill, Pelosi said, "The language that related to this is in the Senate bill."

Speaking on the House floor today in support of the bonus tax, Pelosi said, "It just simply isn't right. When there is a reward, a spelled-out-in-advance reward for those who will take undue risk -- when they fail, they get a bonus, the taxpayer gets the bill. This must end."

In an interview conducted by CNN today, Geithner acknowledged Dodd's "enormously important leadership role" but added that the Treasury Department "expressed concern" about the provision as the government wanted to "make sure it was strong enough to survive legal challenge.

"But we also worked with him to strengthen the overall framework," Geithner added, "and his bill has this very important provision we're relying on now to go back and see if we can recoup payments that were made that there was no legal ability to block."

The bill approved by the House today still needs to pass the Senate, but the bigger question is whether it will stand in court if the companies or those who received the bonuses try to mount a challenge.