Treasury Will Make Grab to Recoup Bonus Funds.

March 18, 2009.
by: JONATHAN WEISMAN, NAFTALI BENDAVID and DEBORAH SOLOMON

WASHINGTON -- The Obama administration said Tuesday it would seek to recoup from American International Group Inc. the $165 million in bonuses paid to employees of the bailed-out insurance titan as it tried to contain a national furor over the payments. White House officials are looking to use an executive-pay provision inserted into the recently passed stimulus law. The administration has seized on language that would allow the Treasury secretary to claw back payments if they were "inconsistent with the purpose" of the Troubled Asset Relief Program or "otherwise contrary to public interest."

In a letter to Congress Tuesday, Treasury Secretary Timothy Geithner said the Treasury planned to use the law to deduct the cost of the bonuses from the government's pending $30 billion cash infusion, and will also extract additional penalties from AIG operating funds.

With angry emails and letters pouring into Congress, a number of legislators had earlier expressed support for a special tax on the so-called retention bonuses paid to 73 AIG employees. Recipients of the funds, at AIG's financial-products subsidiary, include 11 people who no longer work for the company.

Senate Finance Committee Chairman Max Baucus (D., Mont.) and Sen. Charles Grassley (R., Iowa), the committee's top Republican, proposed a 35% tax on employees receiving bonuses and another 35% on the firm that paid it. In a move likely to further unnerve banks, the bill would apply to bonuses earned or paid after Jan. 1, 2009, and would cover not just AIG but all companies that received funds from the government's financial bailout fund.

An AIG spokeswoman has repeatedly declined to comment, except to point to AIG CEO Edward Liddy's letter Saturday to Mr. Geithner, in which he said he found the payments "distasteful." Mr. Liddy was appointed by the Bush administration last year.

The bonuses have crystallized public anxiety over the economic downturn and frustration at the government bailouts, creating a firestorm for the White House. President Barack Obama knew he had little power to stop AIG from issuing the bonuses, even as he stood before television cameras and vowed Monday to "block these bonuses," White House officials said.

By the end of the day, the White House acknowledged its limited options. Its back-and-forth response to the scandal poses a potential threat to Mr. Obama's broad agenda -- especially his ability to wrest fresh bailout funds from Congress, lawmakers say. The bonus flap is also another blow to Mr. Geithner, following criticisms concerning his tax history and the launch of his bank bailout revamp.

White House officials say the president's comments Monday reflected his intention to express personal outrage, even if nothing more could be done to block the payouts. He also wanted to start a new legal review of the AIG contracts, the officials say.

Lawmakers received thousands of calls and emails Tuesday about the bonuses paid to executives in the unit that caused AIG's near collapsed. "It smacks of greed, arrogance and worse," said Sen. Sherrod Brown (D., Ohio).

Mike Markey, an electrician in Swanzey, N.H., emailed his representative and both senators to express frustration that lawmakers hadn't acted sooner. "Why don't you people look into these things before you make a law?" he wrote.

"It's not like we're getting a bailout," says Dana Meier, 46 years old, of Rogue River, Ore., who works out of her home for a company that sells supplements for horses and other animals. "Why is AIG allowed to get away with this?"

Some Republicans, while just as angry as Democrats at the bonuses, were less enthusiastic about a tax penalty, with some questioning the propriety and even the legality of interfering with private contracts.

The law generally allows high taxes on bonuses, even for narrowly defined groups of executives, according to legal experts. Directly singling out executives of AIG in legislation might raise a constitutional issue, however, said Robert Cudd, a partner with Morrison & Foerster LLP in San Francisco.

The fact that AIG was set to pay bonuses to employees at the financial-products division wasn't a secret. AIG disclosed the retention payments in May 2008 in a securities filing, and lawmakers routinely criticized them.

"Fed and Treasury officials have coordinated closely on all aspects of the U.S. government's support for AIG during this extraordinary period," a New York Fed spokesman said.

Though the U.S. government controls AIG through an 80% equity stake and as a major lender, it doesn't have legal authority to freeze payments on its own. The U.S. has committed $173.3 billion to AIG, including $70 billion from Treasury's rescue fund.

In negotiating rescues of AIG late last year, some within the government argued the bonuses should be curtailed. Others said that such a move could cause employees to flee and prompt the firm's collapse. Instead, the government looked for other ways to limit executive compensation, including capping severance pay.

AIG set up a committee in November to examine the bonus issue, says one person familiar with the committee. The group included representatives from the Federal Reserve and Ernst & Young, the Fed's auditor. "If they had wanted to reject the bonuses, they had four months to do so," said this person.

Created in 1987, the financial-products business sold insurance-like contracts to cover a variety of risks using the insurer's triple-A credit rating. In 2007, the business recorded a $10.6 billion operating loss, reflecting the falling value of contracts protecting other firms against losses on assets backed by mortgages. The retention packages in question were tied to levels of pay in 2007 that didn't reflect certain losses incurred by the unit, according to company disclosures.

An administration official said that despite having engineered the first two rescues of AIG while president of the New York Fed, Mr. Geithner didn't know about the pending bonuses until last week.

On March 5, just days after AIG received its fourth round of government aid, the New York Fed informed a Treasury official the payments would be made on March 15, according to an administration official. That information wasn't conveyed to Mr. Geithner until last Tuesday, the official said. The next day, Mr. Geithner called Mr. Liddy and had him perform a legal analysis about whether the payments had to be made. Treasury began its own review of whether it could break the contracts.

On Friday, Messrs. Geithner and Liddy conferred again, and the Treasury secretary didn't protest when the AIG chief said the contracts were inviolable.

By the time National Economic Council Director Lawrence Summers appeared on the Sunday morning talk shows, the bonuses were already in the works, said White House spokesman Robert Gibbs. Government lawyers concluded abrogating the contracts would cost more in legal fees than letting the bonuses go forward.

White House officials say the economic team was reflecting the administration's position. But news of the AIG retention bonuses had hit the newspapers that morning, and anger was building. Some Obama advisers said the economists' language needed to be translated into plainer English. On Sunday evening, the president met with his economic and legal team and told them to keep looking for options on the bonuses.

—Sudeep Reddy, John McKinnon, Michael Crittenden and Kelly Evans contributed to this article.

Write to Jonathan Weisman at jonathan.weisman@wsj.com, Naftali Bendavid at naftali.bendavid@wsj.com and Deborah Solomon at deborah.solomon@wsj.com

LET THE REVOLUTION BEGIN!

Thanks for all you do!
Live your values. Love your country.
And, remember: TOGETHER, We can make a DIFFERENCE!

FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.

Obama's Tax Cuts: How it Will Affect Average Americans.

The media has been obsessing about President Obama's plan to roll back the Bush tax cuts for the wealthiest Americans—from 35% to 39.6%—even asking if that makes him a socialist.¹

But, do you know what tax rate the wealthiest Americans paid on the top portion of their earnings at the end of Ronald Reagan's first term? 50%.

Under Richard Nixon? 70%.

Under Dwight Eisenhower? 91%

Shocking?

And for all the whining about rolling back Bush's irresponsible tax cuts, the truth is that Obama's plan cuts taxes for 95% of working Americans. Further, it closes huge tax loopholes for oil companies, hedge funds and corporations that ship jobs overseas so that we can invest in the priorities that will get our economy back on track.²

We saw a great chart in The Washington Monthly³ that shows just how absurd Republican complaints about Obama's budget are. Check it out and pass it on:

Sources:

1. "A socialist? Obama calls back to insist no," The International Herald Tribune, March 8, 2009
http://www.iht.com/articles/2009/03/08/america/barack.php

2. "Tax Cuts," The New York Times, February 26, 2009
http://www.nytimes.com/2009/02/27/washington/27web-tax.html

3. "Soaking the Rich (Redux)," The Washington Monthly, March 8, 2009
http://www.moveon.org/r?r=51234&id=15733-9067559-WasIO3x&t=1

LET THE REVOLUTION BEGIN!

Thanks for all you do!
Live your values. Love your country.
And, remember: TOGETHER, We can make a DIFFERENCE!

FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.

Do you pay the same taxes as Trump? You Might be Surprised.

How much do you have to make to be in the top tax bracket in NY?
Watch the video to find out:



Shocked? You should be.

Because while President Obama works to make America's taxes fairer, New York's tax code is anything but. Over the last 30 years, the rich have seen their state taxes cut in half. Today, nurses and firefighters pay the same state tax rate as Wall Street tycoons.

It's more than unfair--with the state facing a $14 billion budget gap, it's just madness.

By asking the wealthy to pay their fair share in taxes, we could help balance the budget in a “balanced” way and prevent billions in cuts to classrooms, hospitals, and the elderly and disabled that Gov. Paterson has proposed.

The Facts:

Today, for a single filer, the top New York State personal income tax rate of 6.85% starts on adjusted gross income over $20,000 per year. That means a NYC police officer making $40,361 is in the same tax bracket as former Merrill Lynch CEO John Thain, who made $83.1 million in 2007. You can see the complete New York State personal income tax schedule from the department of taxation here (pdf)

Over the last 30 years, New York has cut its top income tax rate more than 50%, the majority of which went the wealthiest New Yorkers who needed tax relief the least. In the 2008 - 09 budget year, those cuts will cost the state nearly $20 billion in revenue - money we could use to keep hospitals open and schools thriving in tough times (Source: Fiscal Policy Institute).

There's a better way. The Working Families Party and our allies in the Fair Share Tax Reform coalition are fighting to modestly raise income taxes on those who can most afford it to help offset some of the Governor's most painful cuts.

Polls show it's a popular idea, especially once people realize how regressive New York's taxes have become. In the meantime, please vote on where YOU think the top tax rate should begin & we'll send the answers to Albany. Cast Your Vote HERE.

To learn more, check out our resources page.

LET THE REVOLUTION BEGIN!

Thanks for all you do!
Live your values. Love your country.
And, remember: TOGETHER, We can make a DIFFERENCE!

FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.

Struggling States Look to Unorthodox Taxes: Porn & Pot.

New York Times
by: JESSE McKINLEY
Published: February 28, 2009

In his 11 years in the Washington Legislature, Representative Mark Miloscia says he has supported all manner of methods to fill the state’s coffers, including increasing fees on property owners to help the homeless and taxes on alcohol and cigarettes, most of which, he said, passed “without a peep.”

And so it was last month that Mr. Miloscia, a Democrat, decided he might try to “find a new tax source” — pornography.

The response, however, was a turn-off.

“People came down on me like a ton of bricks,” said Mr. Miloscia, who proposed an 18.5 percent sales tax on items like sex toys and adult magazines. “I didn’t quite understand. Apparently porn is right up there with Mom and apple pie.”

Mr. Miloscia’s proposal died at the committee level, but he is far from the only legislator floating unorthodox ideas as more than two-thirds of the states face budget shortfalls.

“The most common phrase you hear from the states is, ‘Everything is on the table,’ ” said Arturo Perez, a fiscal analyst with National Conference of State Legislatures, who predicted the worst financial year for states since the end of World War II.

Nowhere is that more true than California, where Assemblyman Tom Ammiano, a freshman from San Francisco, made a proposal intended to increase revenue, and, no doubt, appetite: legalizing and taxing marijuana, a major — if technically illegal — crop in the state. “We’re all jonesing now for money,” Mr. Ammiano said. “And there’s this enormous industry out there.”

In Nevada, State Senator Bob Coffin said he would introduce legislation to tax the state’s legal brothels, a fee that would be “based on the amount of activities.” And unlike the Washington porn proposal, which drew the ire of the adult entertainment industry, Mr. Coffin’s plan has the backing of the potential taxpayers, in this case brothel owners who employ women as independent contractors.

“I think they figure if they become part of the tax stream, the less vulnerable they will be to some shift in mores,” he said.

Hawaiian legislators were also considering capitalizing on another potential shift in public attitudes when they proposed legalizing same-sex unions, which supporters say could help the slumping tourism trade.

In Massachusetts, meanwhile, state legislators have introduced a proposal to build two resort-style casinos, including one in Boston. A similar push died last year in the State House of Representatives. But Representative Martin J. Walsh, a Dorchester Democrat and co-author of the new casino bill, said a $2 billion budget deficit might have changed some minds.

“Every state in the nation, including Massachusetts, needs to figure out a way of raising revenues,” Mr. Walsh said. “So we need to be creative.”

Scott Pattison, executive director of the National Association of State Budget Officers, said many lawmakers were loath to tap more traditional tax sources during a downturn. “What’s pushing it is this incredible desire to raise revenue,” Mr. Pattison said. “But it’s coupled with the desire not to raise the general and sales and income taxes.”

Whether such proposals can pass is another issue, though each idea has its supporters. Betty Yee, chairwoman of the California Board of Equalization, the state’s tax collector, said that legal marijuana could raise nearly $1 billion per year via a $50-per-ounce fee charged to retailers. An additional $400 million could be raised through sales tax on marijuana sold to buyers.

The law would also establish a smoking age — 21 — effectively putting marijuana in a similar regulatory class as alcohol or tobacco. Marijuana advocates argue that legalization could also decrease pressure on the state’s overburdened prison system and law enforcement officers.

All of which, Ms. Yee said, at least makes the proposal worth talking about in a state with chronic budget problems and a law already on the books allowing the medical use of the drug.

“We know the product is out there, and we know marijuana is available to young people as well, but there’s no regulatory structure in place,” Ms. Yee said. “I think it’s an opportunity to begin the debate.”

Such a debate, of course, does not always favor tax innovators. Several law enforcement groups have already objected to the idea of legal marijuana, which would conflict with federal law.

John Lovell, a lobbyist for several groups of California law enforcement officials, said the plan would create a large, illicit — and thus untaxed — black market, in addition to magnifying substance abuse problems. “The last thing we need is yet another legal substance that is mind-altering,” Mr. Lovell said.

Having taxes on illegal activities, like a seldom-collected tax on marijuana sales in Nevada, also has its drawbacks, said Robert MacCoun, a professor of law and public policy at the University of California, Berkeley, who has researched drug policy.

“It is very hard to tax illegal vices unless one is comfortable with contradiction,” Mr. MacCoun said. “How can you collect the taxes without documenting the behavior? And how can you document the behavior without making an arrest?”

In Washington State, Mr. Miloscia said he had also received criticism from an array of residents and business owners, who accused him of attacking the First Amendment and other sacred institutions with his pornography proposal.

“I had people call up saying their marriages would fall apart,” said Mr. Miloscia, who represents a suburban district between Tacoma and Seattle. “I didn’t know how passionate people are about this stuff.”

LET THE REVOLUTION BEGIN!

Thanks for all you do!
Live your values. Love your country.
And, remember: TOGETHER, We can make a DIFFERENCE!

FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.

Urge Your Legislatures to Support Marijuana Reform

This morning, Assemblyman Tom Ammiano (D-San Francisco) introduced groundbreaking legislation that would remove state-level penalties for responsible marijuana use in California. The bill, A.B. 390, would not only allow personal use and cultivation of marijuana but would also set up a legal system to tax and regulate it similarly to alcohol.

Urge your state legislators to support this bold legislation!

Using MPP’s online action center, writing your state representatives is easy. Just visit the site, enter your contact information, and send your e-mails to your state assembly member and state senator. You can use one of our pre-written messages, or you can write your own.

Just last week, the legislature approved a budget that significantly increases taxes for almost every Californian and makes deep cuts across many vital services. With the state’s imperiled economy, the need to end the costly and ineffective policy of arresting marijuana users and to instead begin taxing California’s largest cash crop is extraordinarily obvious.

This is the first time that legislation calling for marijuana regulation and taxation has been introduced in California’s state capitol. Don’t miss this opportunity to be a part of California history by supporting A.B. 390!

You can read more about this bill on our blog. Please forward this alert to as many like-minded Californians as you can so that they too can take action. Thank you for supporting MPP and sensible marijuana policy in California.

Sincerely,

F. Aaron Smith
California Policy Director
Marijuana Policy Project

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NOTE: Consequently, this brave legislature inspired me to write to my own NY state senators, congressman & assemblymen & encourage those not living in California to do the same. Below is a copy of my letter. Feel free to use any of the information. Of course, the Wall Street Wanker-Banker's comment is NY specific, but true nonetheless. You can find your representatives through project Vote Smart HERE.

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Dear Assembly member / Congressman / Senator _________:

As I type California Assemblyman Ammiano has introduced the marijuana regulation bill, A.B. 390. California schools are facing deep budget cuts and teachers are losing their jobs while the state’s biggest cash crop is untaxed. A.B. 390 will correct this disparity by taking marijuana out of the criminal-controlled underground market and place it in a well-regulated and taxed system. This sensible legislation will raise billions in new state revenue and save precious law enforcement resources.

NYC has the largest public school system in the United States and our children's education is suffering greatly. I'm writing today to strongly urge you to introduce similar marijuana regulation legislation on behalf of NY.

According to research done in 2006, marijuana is contended to be the number one cash crop in the United States. A new Rasmussen Reports in a national telephone survey, that 40% of Americans believe marijuana should be legalized. 55% of Americans believe possession of small amounts of marijuana should not be treated as a criminal offense and 78% support making marijuana legally available for doctors to prescribe in order to reduce pain and suffering. It should be no surprise to learn then, that the World Health Organization estimates 42% of Americans have tried marijuana – indeed, the highest usage level in the 17 countries profiled. That's over 100 million Americans, with 15 million reporting to use monthly!

In fact, every comprehensive objective government commission examining the marijuana phenomena over the previous 100 years has recommended that adults should not be criminalized for marijuana use. Yet, federal government figures indicate that there are more than 41,000 Americans are in state of federal prisons on marijuana charges right now - not including those in county jails. This represents more than the number imprisoned on all charges combined in eight individual European countries! With so many convicted felons, who will be left to vote for you?

Three Nobel Prize winners - including Milton Friedman - were among the more than 500 economists who endorsed a 2005 Harvard study concluding that legalization of marijuana “Would save $7.7 billion per year in state and federal expenditures on prohibition enforcement and produce tax revenues of at least $2.4 billion annually if marijuana were taxed like most consumer goods. If, however, marijuana were taxed similarly to alcohol or tobacco, it might generate as much as $6.2 billion annually.” Not surprisingly, these statistics are fiscally conservative. According to more realistic estimates by one of the Harvard University economists, Jeffrey Miron, replacing the current failing marijuana prohibition system with one of taxation and regulation would save between $10 and $14 billion per year in reduced government spending, and increased tax revenues. Still another researcher recently estimated that the revenue lost from our failure to tax the marijuana industry could be as high as $31 billion!

Even congressman Ron Paul - perhaps the most conservative, grandfatherly man to ever be admired by America's marijuana enthusiasts - agrees the "War of Drugs" isn't working. Speaking live from Clute, Texas, on Friday's Real Time with Bill Maher, the libertarian-leaning Republican did what few other members of Congress will and openly called for the United States' War on Drugs to be abolished. He elaborated further stating, "I don't like pot, but I hate the drug war, so I would repeal all of prohibition. But, I wouldn't even bother taxing it. People have the right in a free country to make important decisions on their own lives. If they want to make mistakes, they can. They just can't come crawling to the government to get bailed out or taken care of if they get sick. I believe in freedom of choice in all that we do, as long as the individual never hurts anybody else. So that means I would get rid of all the federal laws. I would dispose with the drug war. We're spending tens, if not hundreds of billions of dollars on this, then (we) march into places like California, override state laws, arrest sick people and put them in prison. It makes no sense whatsoever," he insisted.

Isn't it time we start making sense for a change? Whether the savings is $2.4, $7.7, or $31 billion per year in state and federal expenditures on prohibition enforcement, any of these numbers should be incentive enough. You've already got some pretty heavy-hitters on your side - three Nobel Laureates, 497 economists and Ron Paul. Do you seriously believe you're more intelligent than these men?

Just think of the boon in tourism a measure like this would bring to the city of NY, not to mention the small business growth. Have you ever been to Amsterdam? It resembles none of the ilk of "Reefer Madness". In fact, Americans already smoke more marijuana as those who can do so legally in the Netherlands. So, why not give people some peace of mind, save copious amounts of money in the process, and inject some much needed revenue into our failing schools? This is a win-win scenario. Perhaps if the wanker-bankers of Wall Street's preferred drug were marijuana, rather than cocaine, we'd be in an entirely different scenario?

Yet, here we are. And where is here, exactly? Someone is arrested for a marijuana offense in America every 36 seconds and 89% of these are for marijuana possession — not for sale or manufacture. In the U.S., there are more arrests for marijuana possession each year than for all violent crimes combined. The "War on marijuana" is clearly not working. However this be decided, we need to shake off the clearly outmoded puritanical shackles, and start getting real. Our nation is in deep you-know-what. FDR was sensible enough to repeal prohibition, what's stopping you, Mr. Assemblyman? Try this site for some hard-hitting research.

Most sincerely,

LET THE REVOLUTION BEGIN!

Thanks for all you do!
Live your values. Love your country.
And, remember: TOGETHER, We can make a DIFFERENCE!

FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.