Attorney General Richard Blumenthal says a proposed Connecticut bill to tax employee bonuses from companies that get federal bailouts likely would survive a challenge in state court.
State Senate President Donald E. Williams (D-Killingly) asked Blumenthal for the opinion based on a reading of the state’s constitution.
The proposed measure seeks to tax yearly bonuses above $1 million paid by recipients of the federal Treasury’s Troubled Asset Relief Program (TARP).
“In my opinion, a court would likely find the proposed tax on TARP bonuses to be a constitutional exercise of the state’s taxing power,” Blumenthal said in his brief.
The multi-billion-dollar TARP has drawn a outcry from taxpayers, policymakers and others because some recipients used a portion of their rescue proceeds to reward senior executives, some of whom live or work in Connecticut.
Insurer Hartford Financial Services Group Inc. and Waterbury regional bank Webster Financial Corp. received TARP. However, there is no evidence either company used TARP funds to pay bonuses to current or former employees.
Indeed, both companies last year reworked pay packages for their most senior officers to satisfy compensation restrictions tied their TARP bailouts.
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