There's the issue of whether AIG ought to have paid bonuses to these people.
My real point about this was that these people were overpaid to begin with. Contracts should be upheld. No doubt about it. That's not an issue. However, if you are writing a contract that obligates multi-million dollar payments to people who can be replaced by people who will work for less, it's a bad contract. If those contracts are so ironclad that those multi-million dollar payments must be made regardless of performance, those are even worse contracts.
In AIG's case, you might say AIG had a bad year. How bad? Well, their company collapsed so massively that they brought down the entire world economy, and the only reason the company continued to exist is that governments found it more convenient to keep that entity in existence than to try to pick up the pieces of existing contracts if that entity ceased to exist. I'd say that's a bad year. If, under those circumstances, the executives of that company, which company ought not to exist at the moment, are contractually entitled to multi-million dollar payments, there is something seriously wrong at the executive compensation committee.
Nevertheless, I'm still reluctant for the government to correct that problem via the tax code.
As a practical matter, it won't happen. The House passed the law, and then someone discovered that some Democrats somewhere had modified the stimulus bill specifically to allow these bonuses, and, that makes the rest of the Democrats a bit reluctant to make a fuss about it, so it won't pass the Senate. We'll never know how the courts would rule on the case.
The question that comes up is whether they would rule against this now hypothetical bill, and if so on what grounds? I think it is at least possible that they would rule it unconstitutional. This bill is, for all practical purposes, a retroactive fine directed at a specific group of people. Courts, liberal and conservative, are very good at finding that certain laws, although not specifically mentioned in the Constitution, violate the spirit of it enough that they find that the law is unconstitutional. It would not surprise me if the court found that a bill like this violated the penumbras and emanations of the ex post facto clause, the attainder clause, the takings clause, or the equal protection clause.
