Tax Bonuses: Be Careful What You Ask For

Chris Dodd, D-Connecticut has been in office since 1974 and it is evident he had spent too many days in D.C. and forgotten the American people. No single elected official should have the power of the American People in all 50 States, yet all by himself, Chris Dodd has cost American tax payers hundreds of billions of dollars.

Senator Dodd forced the language out of the bailout bill that would have prevented AIG and others from receiving bonuses. Now we are going to have laws that tax the bonuses at 90%.

90% of my income over 30 years has come from bonuses, either as a sales commission or based on growth. My personal preference is to get paid based on increasing the profitability of a company. And now even my income is in jeopardy.

The outrage of my income paying for these bonuses has reached an extreme level. But taxing the bonuses to get the money back sets a dangerous precedent. The thought of 90% taxation increases my outrage even further.

The problem isn’t the bonuses, it’s the Board of Directors who hires and approve the Executives compensation and the Executives who hires and pays the bonuses to their employees. It is not “illegal” to write an employment compensation program to reward executives and employees but it certainly is “un-ethical” to include contractual language that rewards any one, at any level, for performance that is negative to the Company.

Since there appears to be no criminal laws broken, the shareholders must enforce the moral ethic obligation of all Board Members and Executives. The shareholders can and should file civil suits against all of them!

If we expect and allow our Government to intercede with the 90% tax laws and other similar forms of regulation now, we can expect the laws to be applied in the future.  But look at the consequences even today:

If you work for an office supply company providing AIG (or any other bailout recipient), your company is a direct beneficiary of the bailout. (Without the bailout, you company would lose the revenue from selling supplies to AIG.) So your income, especially from bonuses, can easily be subject to the 90% tax.

If you work for a company providing seats to General Motors, your bonuses can also be subject to 90% taxation.

Where does it stop? When will it stop?

We cannot let our anger and outrage dictate policy – all we’re doing is following the same footsteps of our elected officials and creating a knee-jerk reaction to a problem without considering the short and long term effects.

In the past many shareholders have filed civil suits against Board of Directors and Corporate Executives. Joe Nacchio, former CEO of Qwest Communication is one example where both criminal and civil suits are holding the executives accountable.

The Corporate Executives must be held accountable for signing the agreements and not adjusting the agreements as the conditions changed. The Board of Directors must be held accountable for hiring the Executives who failed to manage the corporate resources.

We have the laws in place to handle this – we don’t need to set the precedent of 90% taxation!