The House of Representatives approved legislation on Thursday by a vote of 328 to 93 that would heavily tax employee bonuses handed out by companies receiving government bailout funds.
The measure, crafted by majority Democrats, was rushed to the chamber floor amid ongoing anger over bonuses paid by the huge insurance conglomerate, American International Group, or AIG.
The legislation would recover money by imposing a 90 percent tax on corporate employees who got payouts from companies that received at least $5 billion from the government's Troubled Asset Relief Program, or TARP.
Targeted are highly-paid employees with annual family incomes exceeding $250,000. But the measure would apply to dozens of financial institutions and banks involved in the government rescue program.
In debate, Democrats said the legislation responds to public frustration over million dollar bonuses at a time when Americans are trying to cope with an economic recession, a credit crisis and massive job losses.
Democrat Charles Rangel, who initially opposed using taxes to recover the government funds, says lawmakers are not trying to dictate to the private sector, but are sending a message.
"It's not our job to tell the private sector what to do. It is our job to say, 'You don't do it at taxpayer's expense,'" Rangel said.
Republicans called the bill a "political charade," asserting that the Obama administration knew well in advance that AIG, which received tens of billions of dollars in federal aid, would be paying bonuses.
Many Republicans, including House Minority Leader John Boehner, point to a provision in the $787 billion economic stimulus bill Congress approved last month as proof that the Obama administration could have stopped the bonuses.
"This political circus that's going on here today with this bill is not getting to the questions of: 'Who knew what and when did they know it,'" Boehner asked.
Controversy continued to swirl around the stimulus bill provision that effectively authorized bonuses at companies receiving taxpayer bailouts as long as they were locked in before February 11th. This includes $165 million handed out by AIG.
Senate Banking Committee Chairman, Democrat Christopher Dodd says he yielded to Obama administration requests including the provision. Administration officials, said Dodd, gave no indication it was related to AIG.
Senate Republicans echoed Representative Boehner's assertions that President Obama, in signing stimulus legislation, accepted language approving the AIG bonuses.
Senator John Cornyn referred to remarks by President Obama in which he said he would shoulder the ultimate responsibility for the government's failure to stop the bonuses.
"The president graciously said, 'You know what, the buck stops with me.' But I have to say that is not a good enough answer. We have to know what happened; why it happened, so it won't happen again," Cornyn said.
There was more fiery debate as Democrats and Republicans clashed over a non-binding "sense of the Congress" resolution, also crafted by Democrats.
That measure states that President Obama is appropriately exercising authorities Congress granted him in the Emergency Economic Stabilization Act, including steps to recover funds from AIG and prevent companies receiving TARP funds from giving excessive non-performance related compensation payments.
Representative Spencer Bachus of Texas and other Republicans asserted that Democrats were forcing a symbolic endorsement of President Obama's policies when questions remain about the administration actions.
"How can we come here today after all we and the American people have learned this week, and say that everything the president has done is appropriate? The American people recognize the absurdity of such a statement, and so should we," said Bachus.
House Speaker Nancy Pelosi said House actions were sending two important messages.
"One is that the administration should continue in its efforts to recover the money and prevent these bonuses from going forward. And the other is that we want our money back and we want our money back now for the taxpayers," Pelosi said.
Legislation focused on AIG and other companies is also underway in the Senate, where one measure would impose a 35 percent tax on companies paying bonuses and a 35 percent tax on employees receiving them.
Meanwhile, more disturbing news emerged from a House committee hearing as it was revealed that more than a dozen companies receiving government bailout funds owe millions of dollars in unpaid taxes.
Representative John Lewis said a House Ways and Means Oversight Subcommittee examination of tax records showed that 13 of 23 companies benefiting from TARP owe more than $220 million, with two companies owing more than $100 million each.