WASHINGTON, March 19 (Reuters) - The U.S. Congress took a big step toward shutting down the controversial bonuses American International Group (AIG.N) awarded its executives despite receiving $180 billion in government aid.
But the House of Representatives passage of a bill to slap a 90 percent federal tax on those bonuses is only a first step toward enacting legislation.
Here are major coming developments:
* Senators are drafting a separate measure that also would use the tax code to deny the AIG workers -- current and former ones -- their bonuses. Instead of the House’s 90 percent tax on bonuses for executives whose incomes exceed $250,000, the Senate version would place a 70 percent tax on nearly all of the $165 million in bonuses being awarded by AIG. Half of the tax would be paid by AIG and the other half by the employees receiving the bonuses. House and Senate leaders claim that under either plan, state and local taxes would eat up what little money is left after the new federal tax.
* Senate Democratic leaders say they will put their legislation to a vote on the Senate floor soon -- before an early April recess.
* Assuming that legislation passes, the House and Senate would then work out a compromise bill, or one chamber would have to pass the other chamber’s bill. Leaders in both chambers want to finish quickly, given the public outrage over the bonuses.
* The entire AIG bonus controversy has become a gigantic headache for President Barack Obama, who is being pilloried by Republicans accusing him of lax oversight. As a result, he is expected to promptly sign into law any bill aimed at recouping the AIG bonuses that the Democratic-controlled Congress sends him.
* AIG employees or former employees could challenge any eventual law and question whether Congress can meddle in the contracts between AIG and its employees. Lawyers, politicians and others -- unsurprisingly -- have varying opinions.
* Given public anger over the bonuses, it is not clear how many employees actually would step forward and file suit, which would likely publicize their situation after they have fought to keep themselves anonymous.
* While lawmakers predict they will get nearly all of the $165 million back for taxpayers, that could be difficult because some of the employees worked overseas and might not be subject to U.S. tax law.
Reporting by Richard Cowan and Jeremy Pelofsky, editing by Patricia Zengerle