Would a Tax on AIG Bonus Recipients Really Be a Tax?

The proposals seem to have fallen by the wayside by mid-2009, but earlier in the year Congress seriously considered imposing a “tax” of up to 90 percent on bonuses received by employees (and former employees) of AIG and other entities that had benefited significantly from Troubled Asset Relief Program funds. (Indeed, the House actually passed one proposal, which would have imposed a levy on only this discrete group of taxpayers and that would have applied to only this one category of income.) This article considers whether such a levy, applicable at a nearly confiscatory rate, would be constitutional. The article concludes that, if the levy were to derive its authority only from the Taxing Clause - if, that is, no other provision in the Constitution such as the Commerce Clause would give Congress authority - the levy would be constitutionally suspect. The levy’s “taking-like” characteristics would be fundamentally different from what the Taxing Clause contemplates as a “tax.”