Chamber of Commerce Opposes Webb Bonus Tax Amendment to Extenders Bill

In a letter to the Senate, the US Chamber of Commerce said that an amendment to the Tax Extenders Act, HR 4213, that would impose a 50 percent tax on bonuses paid at firms that received TARP and other federal emergency funds would hamper efforts to resolve the ongoing financial crisis, restore economic growth, spur job creation, and is likely unconstitutional. With the punitive use of taxation to target specific companies, said the Chamber, businesses would be reluctant to participate in future emergency programs. Such an outcome would limit the government’s ability to manage crises in the future.

The amendment would impose a 50 percent excise tax on the bonuses of employees at banks, financial firms, and Fannie Mae and Freddie Mac, that exceeded $400,000 in 2009. Any employee who received a bonus larger than $400,000, the salary of the President of the United States, would have to pay a 50 percent tax on the portion of the bonus over $400,000. This is a one-time tax on firms that received more than $5 million in TARP and other federal emergency assistance funds. It affects only bonuses received this year that are based on performance in 2009. The revenues generated would be used for deficit reduction. According to Sen. Boxer, the excess bonus tax will return to the Treasury about $10 million.

The amendment would add a new Section 4999A to the Internal Revenue Code that would impose the tax on any covered employee who receives a covered excessive 2009 bonus, which includes a retention bonus. Covered employees are defined as both as employees of the company and non-employee directors of a major federal emergency economic assistance recipient.

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