The Wall Street Bonus Tax Act would impose the excise tax on any bonus above USD50,000, both cash and stock awards, paid during 2010 by a recipient of financial assistance under the Troubled Asset Relief Program (TARP) to a current or former employee.

The Act would also instruct the Treasury Department to establish a Small Business Growth Fund to hold revenues from the tax, which would be lent to small firms struggling to obtain credit amid tighter lending conditions.

Welch, a Vermont Democrat, unveiled the legislation on January 12 – a day after it emerged that President Obama was considering imposing some form of tax on the banks in order to recoup money spent on the TARP.

“As most Americans struggle to endure a long and wrenching recession, the same Wall Street bankers who came to the American taxpayer with hat in hand are now preparing to pocket record-breaking bonuses,” Welch commented. “Financial firms that received taxpayer assistance must remember that they owe their return to profitability to hardworking Americans.”

Citing a recent New York Times report, Welch said that five of the biggest banks to receive federal assistance last year, including Citigroup, Bank of America, Goldman Sachs, JP Morgan Chase and Morgan Stanley, have collectively set aside USD90bn for compensation.