US lawmakers approve bill taxing executive bonuses

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Friday, March 20, 2009

The United States House of Representatives approved a measure on Thursday to impose a heavy tax on bonuses to executives from companies that have been bailed out by the government. The bill was passed by a margin of 328-93.

Under the bill, executives making over US$250,000 a year would be charged a 90% tax on bonuses. The tax would apply to firms that have been given at least $5 billion in aid from the government.

The move comes after recent outrage at American International Group (AIG), which gave out $165 million in bonuses to its top executives after receiving no more than $180 billion in government bailouts. AIG has said that the bonuses had to be given out, as the company was legally required by contract to do so.

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Nancy Pelosi, the Speaker of the House, said that the bill was necessary because of the bad judgment shown by firms who received bailouts from the government.

"We must stabilize the financial system in order to strengthen our economy and create jobs. We must also protect the American taxpayer from executives who would use their companies' second chances as opportunities for private gain. Because they could not use sound judgment in the use of taxpayer funds, these AIG executives will pay the Treasury in the form of this tax," said Pelosi to reporters following the House vote.

The Senate is expected to vote upon a similar version of the bill. If approved, the differences between the two versions would have to be bridged before it could be signed into law.

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