March 19 (Bloomberg) -- The U.S. House, moving swiftly in response to public outrage, voted to impose a 90 percent tax on employee bonuses at American International Group Inc. and other companies getting at least $5 billion in taxpayer bailout funds.

The 328-93 vote came amid a national furor over $165 million in bonuses paid last week by AIG after it received $173 billion in federal bailout funds. The measure would cover companies receiving 75 percent of federal bailout funds, according to the House Ways and Means Committee.

“These people are getting away with murder,” said Ways and Means Chairman Charles Rangel of New York. “They’re getting paid for the destruction they’ve caused to our communities.”

The 90 percent tax would apply to people with income exceeding $250,000, including bonuses. The tax would apply to bonus payments made after Dec. 31, 2008, and it would cease when the U.S. government’s investment in the company fell below $5 billion. The tax wouldn’t apply to any bonus returned to a company. The tax wouldn’t apply to commissions or fringe benefits.

About $3.6 billion in Merrill Lynch & Co. bonuses wouldn’t be affected by the new legislation because they were paid before Dec. 31. Bonuses for employees at Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley would be affected because they were paid after Dec. 31.

The measure also would affect employees of Fannie Mae and Freddie Mac, Rangel said yesterday.

Vote Breakdown

Voting for the measure were 243 Democrats and 85 Republicans; six Democrats and 87 Republicans voted against it. A two-thirds margin was required under a fast-track procedure that barred amendments by opponents.

At the White House, spokesman Robert Gibbs declined to comment immediately.

Senate Finance Committee Chairman Max Baucus of Montana plans to introduce his proposal later today.

“We just want to recover the taxpayers’ money for them,” said Democratic Representative Steve Israel of New York. Those who got the bonuses “are just going to have to tighten their belts just like the rest of America,” he said.

House Republican Leader John Boehner of Ohio opposed the measure, demanding to know who added language to the $787 billion economic stimulus bill last month that protected executive bonuses that were promised before Feb. 11.

Boehner called the measure a “political charade” and said, “Why don’t we just get it all back?” He said Republicans offered an alternative requiring the Treasury secretary to devise a plan within two weeks to get all the bonus money back.

Constitutional Question

Senator Judd Gregg, a New Hampshire Republican, predicted Congress’s efforts to rescind the bonuses through higher taxes would be thrown out in court. He said the legislation violates the Constitutional ban on bills of attainder, which restricts lawmakers’ ability to punish individual Americans.

“It’s basically targeted on a small group of people,” Gregg said. He also said the bill may exceed lawmakers’ power to rewrite existing contracts. He said “of course” the government ought to try to rescind the bonuses “but we’ve got to do it legally.”

The House bill was drafted yesterday as AIG Chief Executive Officer Edward Liddy told a House Financial Services panel that he asked employees who got bonuses over $100,000 to repay half. Employees who made bad trades that triggered the company’s meltdown have been fired and received no bonuses, he said.

Foreign Employees

The legislation wouldn’t attempt to impose the tax on foreign employees of companies such as AIG, said Ways and Means Committee spokesman Matthew Beck. Under a Senate proposal outlined earlier this week, companies would be forced to pay foreign workers’ portion of an excise tax on bonuses if the money couldn’t be collected by using tax treaties.

Baucus and Senator Chuck Grassley of Iowa, the panel’s ranking Republican, said yesterday they sent a letter asking Liddy to identify who got bonuses from AIG, how long they worked for the company and whether they are still employed by it. They also asked Liddy for legal opinions on the risk AIG faced of being sued if it hadn’t paid the bonuses.

Congress is acting after Treasury Secretary Timothy Geithner said in a letter to lawmakers that his department’s lawyers determined it would be “legally difficult” to prevent AIG from paying the bonuses because they were required by contracts.

AIG also budgeted $57 million in “retention” pay for employees who will be dismissed, according to a March 2 filing to the Securities and Exchange Commission.

Political Heat

The political heat generated by the AIG bonuses indicates declining public and congressional support for shoring up beleaguered financial institutions with government funds and may make it tougher for President Barack Obama’s administration to win approval for future bailouts.

The bonus decision “may jeopardize our ability to get the majority of this Congress to support further largess, to provide funds, to prevent a recession, depression or meltdown,” Representative Paul Kanjorski, a Pennsylvania Democrat who heads the capital markets subcommittee, told Liddy at yesterday’s hearing.

To contact the reporter on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net

Last Updated: March 19, 2009 16:21 EDT