Law Professor Who Advised Obama Says House AIG Bill May Be Unconstitutional
I just got off the phone with Harvard professor Laurence Tribe, who advised Obama during the campaign, and he says he’s leaning towards seeing the new House bill to tax back all the AIG bonuses as unconstitutional.
Tribe’s assertion could spell big trouble for the measure, because it could harden opposition within the Obama administration against the proposal at a time when Obama and his advisers are already expressing doubts about it.
Tribe had previously said that he thought the measure — which would slap a 90% tax on bonuses for executives whose family incomes exceed $250,000 — would pass constitutional muster. But now, after taking a closer look, he’s not so sure.
Tribe says the problem with the bill is that the Constitution forbids Congress from enacting a “bill of attainder,” which would essentially “legislate punishment of an identifiable class,” as he put it. Tribe noted that the Supreme Court had used that clause to slap down other laws.
Tribe says the main problem is that it’s hard to make the case that the law isn’t “punitive.”
“Its punitive intent is increasingly transparent,” Tribe says. “when you have Chuck Grassley calling on [executives] to commit suicide, and people responding to pitch fork sentiment, it’s hard to argue that this isn’t an attempt to punish an identifiable set of individuals who are the subject of understandable outrage.”
The whole point of opposing bills of attainder, Tribe says, is to prevent what some have called “trial by legislature.” Tribe concludes: “That’s the primary vulnerability.”
This could be a problem for House Dems. More on this soon.
Update: David Kurtz observes:
The White House is cool to this legislation to begin with. Tribe’s changing course may help give the necessary political/legal cover to slow roll it in the Senate or eventually veto it — if it gets that far.
Update For Legal Bookworms And Obsessives Only: Another scholar, Yale’s Jack Balkin, differs with Tribe and says it’s wholly Consitutional.
The homepage of this blog is here. RSS feed here. Twitter feed here. Email me here.
Many, many (too many) years ago, I remember the Supremes upholding some kind of retroactive tax increase. I also remember thinking that was nuts; it had to be an ex post facto law. But aggrandizement of federal power was (and still is) the order of the day.
.
Anybody else remember when and/or about what that ruling was?
.
Is there any doubt that this bill taxing Wall Street millionaires will not be blocked one way (Obama) or the other (Senate Democrats)? Does anyone seriously believe this bill any chance to be signed, ever?
The Obama administration seems determined to give as much taxpayer money as possible to bankers, not take away their bonuses.
This bill was always DOA. I expect the House members will look back on it and try to explain it as a symbolic bill that they knew would and could never be enacted.
The problem with the House is that they are forever in campaign mode and thus are too reactionary. I mean half the GOP House caucus voted for taxing folks at 90%, including Cantor.
Reading this made me think about what Obama said last night on 60 Minutes… that “we can’t govern out of anger.”
This bill “to me” is an example of that and I think Obama knows it too. Maybe that’s why he wouldn’t make a strong statement in favor of it in the interview.
I get what the Dems in the House were trying to do… and in responding to the public outrage, they may have taken it a little too far. I’m sure there are other ways of settling this matter.
why oh why
.
Thats not the brightest way to look at the situation. If the bill is unconstitutional then its going to cost even more money than the damn bonuses to litigate the case only to lose in the end and still owe the bonuses. One of the responsibilities of both the legislative and executive branches of government is to make sure any laws they create are constitutional. Thats precisely why the Supreme Court is the check on them to make sure they don’t over step their bounds. The bill was a bad idea to begin with, well aside for one thing.
.
Check this out, by this time next year most people will have forgotten about that bill as it has no chance in hell of passing the Senate. BUT what Democratic candidates for House seats can claim is that 85 House Republicans voted for the largest tax increase in the history of this country. To be honest from strictly a political lens thats a helluva coup by Nancy Pelosi. I can’t wait to see if somebody actually has the cojones to use it in an attack ad though.
Unless the Senate comes up with a reasonable alternative, this thing is DOA. Good – it’s horrible, reactionary legislation, playing to current populist anger. That’s never the best atmosphere for creating laws. This does nothing to solve the larger problems we face. As I’ve said before, if the economy still stinks in 2010, nobody is going to remember a “yea” vote on this stupid proposal.
And I’m glad to see Tribe come around. Everytime I or somebody else brought up the potential constitutional issues with this proposed legislation, we’d get Tribe’s previous comments thrown in our face. In my fantasy world, these Wall Street crooks would be tarred and feathered and made to stand in the public square while the villagers throw rotten fruit at them. But in reality, this bonus tax stuff is stupid and risky and just a bad idea.
I’m afraid that I agree. The courts are the best place to settle this fiasco. But Cassano will be in jail way before the dust settles. Excluding Sen. Byrd, What we have in congress are a bunch of constitutional Illiterates. Who have yet to read the constitution.
They never read Article 1 section 9 line 4 “No direct taxes shall be imposed.” They don’t get it that a named tax is a directed tax towards the article named. such as Gasoline tax, tabbaco tax, communication tax, ect,ect. The fact that each tax named has a different rate confirms the constitutional violation, without even going thru the “equal protection under the law” thing state by state.
OGLiberal, what is unconstitutional exactly about this bill? The idea that a 90% marginal tax rate for people earning over 250K is somehow “punitive” is laughable. Under Roosevelt, the top rate was the same for everyone, not only crooks who stole public money and destroyed the economy.
.
And for all of you who think it is “the wrong way to do it”: what is the right way? Or do you give up every time Wall Street money is involved because that is what Obama does, and you have to agree with him all the time?
Hey tribe. Equal protection under the law Mean any thing.
How about Article 1 section 9 line 4. Do those qomquats know the difference between a direct tax and an indirect one? Huh? Anybody?
why oh why
.
You just made the case for why its wrong when you invoked Lincoln. You can’t target a specific group of people and thats what this bill does. As for whats the right way to do it. The right way would have been for Edward Liddy to fire every sumb*tch that wouldn’t return their bonus. Thats what the right thing is because the contract is valid and it was signed well before the bailout. If all those who keep their bonuses get fired then the problem is solved. But for some reason he is not doing it and that means maybe HE should be the one to get fired by Geitner/Bernake/and Obama and put someone in who isn’t so wed to the current employees.
Consider Lawrence Tribe is on the short list for possible Obama SCOTUS (though a long shot due to his age and gender) and then ask yourself if Tribe thinks it could be unconstitutional if Roberts, Scalia, Alito, Thomas and Stevens will think it’s unconstitutional.
They can’t let this pass, it could come back to bite them at some point in the future. Like taxing his royalties on his book at 90%!!!
Nonsense. Ron Paul is right, a bill of attainder is unconstitutional and only exacerperates the problem.
Obama is right to oppose it as well. If you want to punish wall street, send the executives to prison and cut off the extra “excessive” bailout initiative they asked for. Crack down on the Federal Reserve.
Ron Paul: “Audit the Federal Reserve.” Yes and do it now. We’ll save the best for last…
@Abraham Ben Judea
Re direct taxes, you might want to review the Sixteenth Amendment before getting too worked up…
I have a simple solution. Let everyone have their damn bonuses, but publish the names and addresses of every single economic terrorist who has the gall to extort millions of dollars from the American people just for doing their damn jobs. Then, in a year or so, Congress can recoup the bonus money by raising the estate tax on the heirs of all the economic terrorists strung up by a righteously angry mob.
I’ve been saying for years now that soon America would be faced with a terrible choice: whether or not we would relearn the lesson of the Great Depression — that sometimes government must act to save Capitalism from its own excesses. That question has now been answered to my satisfaction. The economic elites of this country refuse to relearn those lessons and would see America fall into a Second Great Depression rather than surrender a penny of their ill-gotten fortune. And because of their insatiable greed, this time, Capitalism simply won’t be saved. I don’t know what will replace it, but it will probably be horrific for all concerned.
I also don’t know what I find sadder: my near certainty that there will be more than a few dead bankers by the end of the summer or the fact that I can’t bring myself to feel the least bit sorry for them.
Why should we, righteously fed up populous feel sorry for a few spoiled bankers rotting in jail or exiling themselves to paraguay, the great beyond, with Bush Senior & his Zionist enablers?
Why feel sorry for the rotting vipers themselves who have no conscience, who hissed and laughed with glee as the towers burned.
The reality is these sycophants would have us all killed, would enslave the jews, and want total tyranny. There should never be any feeling sorry for a cancerous sore like the elite is….
Their fall should be celebrated along with anyone who falls in battle defending it from their tyrannical agenda…..I care nothing for the tyrannical banker and may they meet their just reward.
I don’t understand. If this bill would be ruled unconstitutional because it punishes an identifiable class, then why are all laws that diminish the equal rights of Lesbians and Gay Men, not considered unconstitutional? What about the law that the GOP pushed just to prevent Terry Schaivo’s husband from making a private medical decision?
It’s okay when the GOP does something like this, but not the Dems.
“this isn’t an attempt to punish an identifiable set of individuals”
It seems to me that it is an attempt to regulate how govt funds are being used. The bill is not targeted to AIG alone, though you might get that idea from some coverage. It concerns bonuses paid this year to companies that needed government bailout money.
Since we are talking about funds to certain companies, yes, such a bill would involve “an identifiable set of individuals” in some fashion. How could it not? So, would limits in the funding bill.
As to the motive, you have to look at the matter itself. Anger doesn’t suddenly make a regulation bad. Even populist anger at certain people. Again, the bill isn’t only centered on AIG. The anger can led to bad policy, and this might be the case, but I am wary about raising constitutional concerns.
The “anger” is that the funds are being used badly. It is not a “bill of attainder” to try to fix a problem with how funds targeted to a certain group is being used. The only “punishing” to be done here is not letting the funds be misused. Not taking stuff other than the money away from them. Or, taking money for something else we are angry at them for.
It also is not criminal for ex post facto law purposes. Retroactive taxation wouldn’t be either … that prohibition deals with criminal activity, not taxation issues. Not using it for civil matters has been around for 200 years. It might be a due process problem. Saying taxation is an unconstitutional “taking” is also dubious.
I’ll second what sgwhite wrote in response to Why O Why. I will also add – and this is directed at Why O Why – that my opinion has nothing to do with my feelings about Obama. I’m a liberal first, Democrat second, and Obama supporter third. My party in the House just passed proposed legislation that I think stinks and may be unconstitutional (bills of attainder, etc.) Even if it is constitutional, it sets a horrible precendent. I’ve never been a fan of reactionary legislation and that’s what this is. Bottom line is that when taking over 80% of AIG, our government – whether it was the Bush or Obama admin – should have set the deal so that garbage like this wouldn’t go down. They did not, and that sucks. Those controls shouldn’t have had to have been included in an amendment to the stimulus package. And Congress shouldn’t be changing the tax code because of what happened at AIG. So both the Bush and Obama admin dropped the ball here. But the solution Congress is proposing – targeted tax legislation whose sole purpose is to quench the populist appetite for vengeance – is just bad policy and would horrify our founders, even if it may turn out to be constitutional.
What does this accomplish? It makes an angry public – and I understand why they are angry – feel a little better but does nothing to solve our larger problems. It sets a bad precendent and may – if signed into law – turn out to be unconstitutional when it’s challenged in the court. It give politicians on both sides of the aisle a populist “victory” to highlight when they run for re-election in 2010, but that won’t matter a bit to voters if the economy still stinks. And the people who were getting the bonuses? They’ll still be A LOT richer than most Americans. Seriously, do you think this is really going to hurt them all that much?
Far more important than the AIG bonuses is the fact that members of Congress 1) did not read the entire Stimulus bill, and 2) consistently lied about whether or not a bonus exemption was in the bill.
Let’s face it: our government is too large to govern effectively. The mantra “too large to fail” should be changed to “too large to succeed”.
I propose that we change our Constitution to reorganize the manner in which we choose our legislative bodies. The Senate would be left as is, but the House of Representatives would be reorganized by ‘function’, e.g., finance, defense, human services, education etc.
The net result is that instead of being represented by lawyer-generalists, we’d be represented by people who might actually have some knowledge of and interest in what Americans want.
I thought bills of attainder had to be for criminal matters. Also, the bill is not ‘punitive’. Is it ‘punitive’ to have a penalty tax on people who make early withdrawals from their 401(k)? No. But Congress enacted one to use the tax code to influence public behavior. I guess you could argue it ‘punishes’ people who for some reason cashed out a 401(k) too early, as opposed to people who spent their income without parking in the 401(k) to begin with. Here, Congress controls public money, some of it went where it shouldn’t have gone, and they also want these banks to stop paying ‘bonuses’ with tax dollars. I don’t see why the tax code is not a legitimate tool for achieving that goal. Besides, a strong majority of the public supports the tax.
Another point is that this does not single out individuals, any more than, say, far higher penalties for crack than for other forms of cocaine do.
I just don’t see how anyone can argue that opposition to this tax is anything other than a double standard. Workers all over the country are essentially being asked to accept lower wages and benefits, and then they’re being taxed to pay more money than they could ever hope to see to a wealthy elite that is at the root of our current problems. If Congress can’t act to stop that, then what can it do?
Yale’s Jack Balkin differs with Tribe, says measure is wholly constitutional:
http://theplumline.whorunsgov.com/economy/ivy-smackdown-another-legal-prof-gives-house-aig-plan-the-thumbs-up/
g
Abraham Ben Judea:
How does the 16th Amendment affect your analysis? It allows taxes on incomes.
Also, an equal protection attack on the tax probably won’t work. I don’t think an equal protection claim would also work. Very few tax statutes have been struck down under the Equal Protection Clause. For example, the Supreme Court, in NORDLINGER v. HAHN (90-1912)(1992), rejected an EP claim concerning Proposition 13 in California, which limited property taxes, even though it meant a new home buyer in Los Angeles could pay 17 times more in taxes than her neighbor who had lived in the same house for decades. The Court said:
“The Equal Protection Clause does not forbid classifi-cations. It simply keeps governmental decision-makers from treating differently persons who are in all relevant respects alike.”
“As a general rule, “legislatures are presumed to have acted within their constitutional power despite the fact that, in practice, their laws result in some inequality.” McGowan v. Maryland, 366 U. S. 420, 425-426 (1961). Accordingly, this Court’s cases are clear that, unless a classification warrants some form of heightened review because it jeopardizes exercise of a fundamental right or categorizes on the basis of an inherently suspect characteristic, the Equal Protection Clause requires only that the classification rationally further a legitimate state interest. (my emphasis) See, e. g., Cleburne v. Cleburne Living Center, Inc., 473 U. S. 432, 439-441 (1985); New Orleans v. Dukes, 427 U. S. 297, 303 (1976).
“In general, the Equal Protection Clause is satisfied so long as there is a plausible policy reason for the classification, see United States Railroad Retirement Bd. v. Fritz, 449 U. S. 166, 174, 179 (1980), the legislative facts on which the classification is apparently based rationally may have been considered to be true by the governmental decisionmaker, see Minnesota v. Clover Leaf Creamery Co., 449 U. S. 456, 464 (1981), and the relationship of the classification to its goal is not so attenuated as to render the distinction arbitrary or irrational, see Cleburne v. Cleburne Living Center, Inc., 473 U. S., at 446. This standard is especially deferential in the context of classifications made by complex tax laws. “
Hey jack… I know about the 16th admenment. “Taxes shall be imposed for whatever income derived.” underline whatever income. that does nothing against the prohibition against direct taxation. Think, one group 30% the other 15% and so on. Again when you target a group or Item to be taxed, unless its applied evenly across the board state by state county by county. Two constitutional violations occur, direct taxation and equal protection under the law. The 16th admendment only gives the Gov the power to tax income, nowhere does it say the direct taxation clause is hereby annulled.
Wow…what likely exchage. Every time SCOTUS gets involved something is bound to be screwed up, for two reasons. unseen behind the curtain $influence$ or the Judges are working under the influence of some pharmaceuticals or combinations of legal Pharma with who know what side effects, as such is the case with the current Scotus. Ginsberg and Kennedy, Scalia to mention just 3. Unseen manipulations and working under the influence are the two reasons judges go against their own common sense. I say old sickly judges working under the influence of multiple drugs should step aside. or let the public know what happy pills they are taking.
Joe: “It seems to me that it is an attempt to regulate how govt funds are being used. The bill is not targeted to AIG alone, though you might get that idea from some coverage. It concerns bonuses paid this year to companies that needed government bailout money.”
If that were true, the law would still be unconstitutional (under Pennhurst, Dole, and many other cases). If the Federal Government wants to impose conditions on the use of money it grants, it has to do so before the fact. It cannot give away money and then impose conditions on it later. If the purpose is to control the already-spent money, it’s an ex post facto law.
If a tax is punishment, and you can’t punish a class, then you can’t tax the working class. Eliminate the IRS
No mention of Chris Dodd, the Senator who snuck in the AIG bonuses into the stimulus bill by commenters? That’s where anger should be directed. That, and the fact that Obama signed it without reading it, contrary to his campaign announcements.
In my fantasy world, these Wall Street crooks would be tarred and feathered and made to stand in the public square while the villagers throw rotten fruit at them.
Wall Street is every one of us who tried to maintain a 401k to retire on. The crooks are those who shielded Fannie and Freddie from the extra regulations aimed at preventing the subprime mortgage crash that launched this disaster.
In a superior fantasy, the Congressional crooks who wrote the ’stimulus’ bill and every single ‘elected official’ who signed it without reading it would be tarred and feathered and made to stand in the public square while the villagers throw rotten fruit at them. No one else carries the responsponsibility for this debacle.
This taxing of bonuses, which are probably perfectly legal if one had time to read the Bill which was over a 1,000 pages, …is just another big distraction being used. To keep the public’s attention diverted so they don’t focus on what’s in the works as you breathe. The ultimate plan of the Global Elite, …the private bankers of the FED and every other Central Bank in the world, …to destroy this Country once and forever. I’ve heard and read many warnings to keep your ears open and your eyes focused come the part of early fall this year.
“If that were true, the law would still be unconstitutional (under Pennhurst, Dole, and many other cases).”
Those involve power over states, which makes it not a great comparison.
“If the Federal Government wants to impose conditions on the use of money it grants, it has to do so before the fact.”
Those cases involved conditions on states. They did not involve power over taxation of individuals or companies. My concern, anyway, was to address the bill of attainder claim. The tax here is not an unconstitutional punishment but a civil means to address ongoing congressional concern over how money was spent, particularly concerning an ongoing regulated bailout matter.
“It cannot give away money and then impose conditions on it later. If the purpose is to control the already-spent money, it’s an ex post facto law.”
It is not imposing conditions — it is taxing the money to further the overall well being of our economic system. This is for the general welfare. Again, even if illicit, this sort of measure is not a criminal penalty, so is not an ex post facto law. It would be a due process violation of property rights, if anything.
Take a look at the March 30, 1988 case involving “aiming the legislation” and “equal protection under the law” …
“… a federal court yesterday ruled that Kennedy’s last-minute amendment forcing publisher Rupert Murdoch to sell a newspaper or television station in Boston and New York is unconstitutional.”
“The US Court of Appeals, in an unusually direct critique of a senator’s action, said Kennedy’s insistence that he was not aiming the legislation at Murdoch is “suspect.” The court, with both Reagan appointees voting together, ruled 2-1 that the Massachusetts senator’s amendment deprived Murdoch of his equal protection under the law and his right to free speech. “
Joe, will you please address the FACT that Chris Dodd got a clause into the Inter-Gnerational Theft Act ALLOWING these retention bonuses? You can try to argue your way around the “attainder” issue, but seeking to retrospectively to take back $$ from those who entered into an agreement dated Feb 2007 and relied on that Dood language, which was and STILL is “the law”, is pure “ex post facto” — not to mention a blatant attempt to interfere with civil contracts.
No, Bills off Attainder don’t have to be about imposing criminal penalties: suppose Congress passed a law saying “No person of the Jewish faith may be employed by the federal government.”
Abraham: an income tax IS a “direct tax”, and the fact that Sixteenth Amendment uses the language of Art I, Section 9 to free income taxes from the latter’s restrictions is dispositive evidence that the amendment trumps it. THAT’s why it’s a constitutional amendment!
Per wikipedia: “In Abrams v. Commissioner, the United States Tax Court stated:
Since the ratification of the Sixteenth Amendment, it is immaterial with respect to income taxes, whether the tax is a direct or indirect tax. The whole purpose of the Sixteenth Amendment was to relieve all income taxes when imposed from [the requirement of] apportionment and from [the requirement of] a consideration of the source whence the income was derived.[25]
p.s.: next time someone tries ionizing that sumbitch Kennedy, remember how he tried to use a Bill of Attainder to crush a political enemy. Kennedy is and always has been an arrogant and vicious piece of work.
Oops! I meant “lionizing”, not ionizing —though the latter conures up some very satisfying images.
“No, Bills off Attainder don’t have to be about imposing criminal penalties: suppose Congress passed a law saying “No person of the Jewish faith may be employed by the federal government.””
What about “no convicted felons may be employed by the federal government”? In any case, your example is unconstitutional because it violates the First and Fourteenth Amendment, not because it’s a bill of attainder. Economic status is not a suspect class, and it is perfectly permissible to discriminate on that basis for any non-arbitrary reason. Ironically, it was conservative Supreme Court judges who established that principle in a case which held that a person was not deprived of his civil rights because he was too poor to pay the filing fee for a court action. What goes around, comes around, I guess.
This contrived outrage at the AIG people is misguided and ill-informed. Take the torches and pitchforks to where they should be pointed: Sen. Dodd, Rep. Frank and Tim Geitner, who knew the bonus language was in the stimulus bill. They knew it. And every moronic politician who voted for a $800billion stimulus bill that NOBODY read.
What’s going on right now is banana republic governing…it’s pathetic, and it is unworthy of the country.
just because laurence tribe suggests something MIGHT be unconstituional has no bearing on what it actually is. see, e.g., cases where tribe lost 9-0 at the Supremes.
Tribe’s argument is simply NONSENSE and flies in the face of legal history. Bills of attainder have to do with CRIMINAL law, not civil law. LOOK IT UP, Professor. … If he wants to make this ridiculous argument, that is his prerogative, but he is ignoring what the law has said — yes, literally — since before the Republic was formed (i.e., in English legal history, antedating our own): Bills of Attainder deal with CRIMINAL law: crimes (newly defined or changing a definition), punishments (e.g., in jail and by fines (AFTER JUDGMENT in a criminal case), not taxes or anything in civil law…. Gee, I wonder who’s paying Tribe’s fee on this matter ? Or if he should just RETIRE, since no lawyer would make such an argument unless he/she were being paid to do so or was senile; I’ve been a lawyer for over 25 years and Tribe’s position on this is nonsense. And he knows it (or should).
So…. the administration pushed to keep the bonus loophole, now want to tax, with an unconstitutional bill, a few million dollars, after tens if not hundreds of billions have already been burnt up?
Sounds like a distraction to me.
I don’t believe that bonus’s are legal. Where did this precedent come from. An employee is hired to perform a job at a predetermined rate of pay. Stock holders are constantly screwed by the managers of the stocks they hold. Bonus money is just another legal way of stealing that the north east elites came up with.
I’ve been involved in taxes for longer then I care to admit, both on the private side (all my working life story!!) and from a legal viewpoint since satisfying the bar and following up on tax law. I’ve supplied a lot of advice and righted a lot of wrongs, and I must say that what you’ve put up makes impeccable sense. Please continue the good work – the more individuals know the better they’ll be armed to handle with the tax man, and that’s what it’s all about.