Congress eyes bonus surtax amid AIG outrage

The American International Group (AIG) building in New York's financial district, March 16, 2009.

WASHINGTON (Reuters) - Some members of the U.S. Congress on Tuesday proposed slapping a surtax on bonuses paid to executives at American International Group Inc, amid outrage over the large payouts.

Michigan Democratic Rep. Gary Peters introduced a bill in the House of Representatives to impose a 60 percent surtax on bonuses over $10,000 at any company in which the U.S. government has a 79 percent or greater equity stake.

"Currently, AIG is the only company that meets this threshold," Peters said in a statement. "The legislation I'm proposing will get taxpayers their money back.

President Barack Obama on Monday expressed "outrage" about $165 million of bonuses to employees of AIG, once the world's largest insurer, now being bailed out by the government.

Senate Banking Committee Chairman Christopher Dodd said Peters' approach was "worth pursuing as an idea."

California Democratic Rep. Brad Sherman, a House Financial Services Committee member with Peters, said he favors "a tax law to impose a substantial surtax on excessive compensation paid to executives at bailed-out firms, especially AIG."

New York Attorney General Andrew Cuomo has said he will subpoena AIG for more information about the bonuses, including the names of the recipients.

Peters said it was "beyond outrageous that the very people who brought AIG to its knees and helped create the current financial crisis are scheduled to receive hundreds of millions of dollars in bonuses while tax dollars keep their company afloat."

Iowa Rep. Bruce Braley and Connecticut Rep. Joe Courtney, both Democrats, released a letter signed by 90 members of Congress to Treasury Secretary Timothy Geithner urging that planned bonuses to AIG executives be stopped.

Braley also said in a statement that he introduced legislation "to increase the tax rate on any bonuses awarded by businesses receiving government TARP funds, including AIG."

New York Democratic Senator Charles Schumer warned AIG employees to return the bonuses they are receiving or face being slapped with a major tax on those payments.

"They should voluntarily return them (the bonuses). If they don't, we plan to tax virtually all of it," Schumer said.

(Additional reporting by Kim Dixon; Editing by Dan Grebler)