"The ex post facto clause applies exclusively to criminal punishment and poses no difficulty here"

[ProSense]

Harvard Law Prof: Big Tax on AIG Bonuses Could Be Constitutional

By Debra Cassens Weiss

Harvard law professor Laurence Tribe says a high tax on bonuses paid to executives by companies receiving bailout funds could likely be structured in a way to avoid constitutional problems.

Some proposals are circulating to tax bonuses at rates varying from 70 percent to 100 percent as a way to recoup the $165 million paid to executives at AIG, the Wall Street Journal (sub. req.) reports.

One issue is whether such a bill violates the Constitution’s ban on Bills of Attainder that punish a person or group without a trial. Tribe told the Wall Street Journal that Congress could avoid that constitutional problem with a broad bill that doesn’t target “a closed class of named executives.” Also blunting any Bill of Attainder challenge would be the fact that the aim of the tax is fiscal rather than punitive, and it would apply in the future as well as retroactively, Tribe wrote in a summary posted at the Atlantic.

Another issue is whether retroactive taxes violate the ex post facto clause. Actually, it's a nonissue, Tribe says. "The ex post facto clause applies exclusively to criminal punishment and poses no difficulty here," Tribe told the Wall Street Journal Law Blog.

Tribe also addressed whether the law would violate the contracts clause, the takings clause and the due process clause in the Wall Street Journal Law Blog interview. He saw no problem. Many courts have ruled requirements for substantive due process are not violated if the legislation has a rational legislative purpose, "something nobody could deny in this instance," according to Tribe.

The Wall Street Journal also points out that a tax rate approaching 100 percent is not unprecedented. The top federal income-tax rate was once 90 percent, and some excise taxes on specific transactions have hit 100 percent.

I'm in the process of taking a closer look at this issue at the request of several others both in and out of government, but I can tell you this much on the basis of what I know from my past research and experience: It would not be terribly difficult to structure a tax, even one that approached a rate of 100%, levied on some or all of the bonuses already handed out (or to be handed out in the future) by AIG and other recipients of federal bailout funds so that the tax would survive bill of attainder clause challenge.

Such a tax would presumably be leveled on the basis of some criterion sufficiently general to avoid classification as a measure targeting solely a closed class of identified and named individuals. The fact that the individuals subject to the tax in its retroactive application would in principle be readily identifiable would not suffice to doom the tax either from a bill of attainder perspective or from a due process perspective. Moreover, the fact that the aim of such a tax would be manifestly regulatory and fiscal rather than punitive and condemnatory, and that the tax would be part of a measure that would be prospective as well as retroactive in its operation, would serve to blunt the force of any bill of attainder challenge. Finally, such a tax would be devoid of the sting of political retribution and would not partake of the classic "trial by legislature" that the attainder ban was designed to avoid.

All things considered, I believe it very likely that Congress could design a fully constitutional means of clawing back into the federal treasury all amounts paid (or to be paid in the future) in the form of retention bonuses from federal funds disbursed either by the Federal Reserve Board pursuant to legislative authorization tracing to the 1930s or by the Treasury pursuant to the most recently enacted federal bailout and stimulus measures.

link

Obama Praises Bonus Tax, Looks Forward To Getting Final Bill