The bailout-bonus-tax plan shows why the US is bad for business

The house has just passed a bill allowing a 90% tax on paid bonuses to bailed-out AIG executives. The bill is a response to “public” outcry that he insurance giant and other bailed out companies are mis-using taxpayer dollars.

But is it the right move, and what does this mean?

Here are some facts:

The contract for bonuses paid was made and signed over a year previously. It was legal.

Senator Chris Dodd included in the yet-to-be-read-but-passed Stimulus bill approval for the contracted bonuses.

Treasury Secretary Timothy Geithner was previously in the room last year when these bonuses were discussed.

Much of the bonuses paid went to executives in the derivatives sections of AIG which was part of the company that failed.

Here are the results:

The US Government is sending a strong message to executives of what will and will not be tolerated. That when the Government for whatever political reason disagrees with an already signed and agreed upon legal contract, they have and will use the full power of the government to nullify that contract.

Although most would agree, the bonuses are a farce and a complete misuse of taxpayer dollars, the contract made to allow such bonuses was/is legal and binding. Therefore the message that is ultimately sent to the American people and to businesses in America is that your contracts are not solid, especially when they are not in the best interests of the federal government, for whatever reason.

Case in point, over 60 billion tax-payer dollars have been sent to support banks overseas. Yet, there is an outcry over 165 million used in bonuses. The federal government passed an 800 billion stimulus bill that was unread and most going to pork projects to stave a crisis that the president has recently claimed is “not as bad as we thought,” yet the full force of the government is used to take back 165 million in privately contracted bonuses in an effort to get the money “back for taxpayers.”

Why is this thuggery? Because there is little discussion to the public at large as to how unconstitutional it is for the US government to get involved in private contracts at this level. And have made it clear, that they will control at will. Also little press has been made about the last-minute altering of a provision in the un-read-but-passed $787 billion stimulus law by Sen. Dodd to cap executive compensation for firms receiving government bailouts.

Already, companies are exploring options to leave the US in lieu of better tax-friendly locations. Many more future companies are excluding a US presence. And now, not only with the threat of greater taxes, is the added threat that government will impose themselves at political will only increases opportunity for foreign competitors.

What is offered by the competition? Examples include:

Corporate flat tax rates from 19% - 0%
Personal Income flat tax rates
Economy entry tax incentives/breaks
No world-wide taxation
No Sarbanes-Oxley tax costs
No Mark-to market
Lower capital gains
Fewer Union hurdles
Less Government interference, or at least a consistent policy

Change.