I guess it wins votes: Exploiting the outrage a populace who loves to hate failed Wall Street fat cats. But the vicious moralizing is revealing. What it says about politicians is actually very scary indeed. In case you had any doubts about the purpose of taxes, they are punitive—doled out on whoever (group or industry) is out of favor at the moment. Yesterday’s quick passage in the House of a bill to levy 90 percent income tax on bonuses on any TARP-receiving companies is proof.
The Cato Institute’s David Boaz says this type of selective taxation is a form of tyranny:
The rule of law requires that like people be treated alike and that people know what the law is so that they can plan their lives in accord with the law. In this case, a law is being passed to impose taxes on a particular, politically unpopular group. That is a tyrannical abuse of Congress's powers.
So, now you’ve got the federal government trying to alter private contracts (agency mortgages, for instance) and now the political class is now issuing punitive taxes on an unpopular group of people: bankers. And it’s doling out money to automakers and, now, perhaps, auto parts companies? Where will it all end?
I think Larry Kudlow was right: AIG should have declared bankruptcy a long time ago. In bankruptcy, all AIG’s contracts would have been null and void—and the vultures could have come in and sorted out its good assets from the bad. (Go to his Money & Politics blog, The AIG Outrage, published on March 17.)