This editorial appeared in The Miami Herald.
The national outrage over the scandalous bonuses paid to executives at AIG is fully justified, but the response in Congress doesn't make sense. Experience shows that legislation forged in haste amid the swirl of headlines and theatrical hearings tends to produce bad policy, and this case is no exception.
Using the tax code as a weapon to exact revenge on a select few, no matter how badly they've behaved, is a horrible idea. Slapping heavy taxes on the bonuses and on the company that issued them may satisfy enraged taxpayers who see incompetent executives being rewarded for failure, but it sets a bad precedent.
It may also violate the constitutional ban against ex post facto laws. More to the point, lawmakers are treating a symptom of the economic crisis and overlooking the root causes of the problem – unbridled corporate greed and the failure of the regulatory system.
There are better ways to channel taxpayers' anger and fix the immediate problem. Start with New York Attorney General Andrew Cuomo's suggestion that a legal challenge to the bonus contracts can succeed. Under the legal notion of force majeure, he argues that circumstances have changed so radically since the bonus system was approved that the company no longer is obligated by law to hand out the money.
To read the complete editorial, visit The Miami Herald.