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Using the Tax Code to Get Back the $18b Wall Street Bonuses

The Daily Kos proposes the use of the Tax Code to retrieve the $18 billion in bonuses paid out by Wall Street firms, which President Obama characterized as "shameful"":

Any employee, consultant or officer of any entity that was the recipient of funds provided under Public Law 110.348, commonly known as Toxic Asset Relief Program, shall have the portion of income consisting of special discretionary remuneration taxed at the following rate:

  • Amount up to $50,000, as ordinary income
  • Amount Over $50,000, up to $500,000, at 75%
  • Amount over $500,000, at 95%

For those who doubt that this would be constitutional based on the proscription against ex-post facto laws, such restrictions only apply to criminal legislation. …  As stated in Karpa v. Commissioner, 909 F.2d 784, 786 (4th Cir.,1990):

The prohibition against ex post facto laws applies only to penal legislation that imposes or increases criminal punishment for conduct predating its enactment… The ex post facto clause is not applicable to legislation imposing civil disabilities…Applying these general principles, the Supreme Court rejected an ex post facto challenge to Connecticut's retrospective application of a tax penalty in Bankers' Trust Co. v. Blodgett, 260 U.S. 647,… The statute challenged in Bankers' Trust imposed a 2% tax on the value of estate property for the five years preceding a decedent's death where it appeared that the property was taxable and no state or local tax had been assessed or paid during the year preceding death… The Court recognized that the sanction for failure to pay taxes is "usually punitive," and the Connecticut provision for "penalizing a delinquency" was no exception… But the Court held that "[t]he penalty of the statute was not in punishment of a crime," and hence the ex post facto prohibition was simply not implicated." [Citations and footnotes omitted.]

For a contrary view, see Steve Selinger, The Case Against Civil Ex Post Facto Laws (Cato Institute).  (Hat Tip:  Al Rodbell.)


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