Lawmakers explore taxing AIG bonuses

Senator Harry Reid says employees of the bailed out insurance giant 'will not be able to keep all their money.'

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WASHINGTON (CNN) -- Senate Democrats want to tax the controversial bonuses doled out to AIG employees who work for the division that led to the company's downfall.

Senate Majority Leader Harry Reid announced on the Senate floor Tuesday that the tax-writing Senate Finance Committee will pursue a legislative fix in such a way that the "recipients of those bonuses will not be able to keep all their money -- and that's an understatement."

Senate Finance Committee Chairman Max Baucus, D-Montana, will propose a special tax within the next 24 hours, Reid said.

"I don't think those bonuses should be paid," Baucus said Tuesday.

The idea was first floated Monday by Sen. Christopher Dodd, chairman of the Committee on Banking, Housing and Urban Affairs.

"One idea we're kind of thinking about is a tax provision," the Connecticut Democrat told CNN. "We have a right to tax. You could write a tax provision that's narrowly crafted only to the people receiving bonuses. That's a way maybe to deal with it."

At an unrelated hearing Tuesday at which IRS Commissioner Douglas Shulman was testifying, Baucus asked the nation's top tax official, "What's the highest excise tax we can impose that's sustainable in court?"

Shulman did not respond directly, but Sen. Bill Nelson, D-Florida, chimed in to suggest the tax could be as high as "90%."

--by Dana Bash and Ted Barrett  To top of page

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