The public is not happy about the $165 million in retention bonuses that A.I.G. employees got last Friday. A.I.G. claimed that, even though it booby trapped our entire financial system with poison-tipped credit default swaps-and needed $180 billion from taxpayers to avoid a catastrophic collapse-it needed to retain its "best and brightest."For a while Geithner and Summers hid behind a flimsy "rule of law" argument, insisting that, abhorrent though the bonuses were, they were promised long ago and "the government cannot just abrogate contracts."But, as some commentators started realizing in recent days, the government does write the tax code. Maybe the government can't prevent the paying of the bonuses but it can just tax them right back. From Capitol Gains and Games:"And there you have it. Right there on the Form 1040 for the year 2009, just add three lines:
- Did you receive compensation from any firm(s) on the attached list?
- If so, enter the amount of all such compensation in excess of $250,000.
- Add this amount to your total tax liability."