Sunday, March 29, 2009
The Congressional Research Service has issued a report on the AIG bonus tax, Retroactive Taxation of Executive Bonuses: Constitutionality of H.R. 1586 and S. 651 (R40466) (Mar. 25, 2009). Here is part of the Summary:
The two main criteria that the courts will look to in order to determine whether legislation is a bill of attainder are (1) whether specific individuals are affected by the statute (“specificity” prong), and (2) whether the legislation inflicts a punishment on those individuals (“punishment” prong). The Supreme Court has identified three types of legislation which would fulfill the “punishment” prong of the test: (1) where the burden is such as has “traditionally” been found to be punitive, (2) where the type and severity of burdens imposed cannot reasonably be said to further “nonpunitive legislative purposes,” and (3) where the legislative record evinces a “congressional intent to punish.”
Although the bills would apply both prospectively and retrospectively, they would both appear to meet the “specificity” prong. This is because each bill would apply, in part, to a specified group of people, identified by past conduct, who cannot meaningfully withdraw from that group. As to the “punishment” prong, confiscation of property has been found to be a “traditional” punishment. Thus, the closer that a tax rate gets to 100% on income already earned, the more likely that such a tax would be seen by a court as rising to the level of punishment. Also, the deterrence of granting or receiving future bonuses would not appear to be an applicable regulatory purpose where bonuses have already been paid. Thus, the most logical remaining nonpunitive regulatory purpose for the statute would appear to be revenue raising. A review of the legislative history established so far, however, seems to indicate that raising revenue is not a primary purpose behind the proposed bills. Rather, the legislative history seems to contain comments that would indicate the existence of a congressional intent to punish those individuals receiving bonuses. Consequently, while both of these bills may raise constitutional issues, H.R. 1586 raises the most serious constitutional concerns.