dagblog - Comments for "Rethinking Income Inequality: A New Kind of Payroll Tax"

I question a chart on salary

PeraclesPlease — Sat, 03 Dec 2011 08:23:45 +0000

In reply to Well, ok but if that's what

I question a chart on salary composition that ends in 2000, at the height of the internet boom.

This article below notes the great increase in corporate income in the last couple years that wouldn't be paid out in salaries:

http://thinkprogress.org/economy/2011/06/30/258388/corporate-profits-recovery/

Another unmentioned aspect here is how government can help increase value of workers to corporation. Universal health care is one I always supported - takes the HR department out of the health shopping business, and takes health calculations out of the P&L columns for some beancounter to gamble with.

Another is productivity. Certainly workers with assured health care and a decent reporting system waste less time on phone menus and more time on work.

Our education system can take into account what type of work shifts are going on here. If Project Management is becoming an essential aspect of most high paid work, the principles of project management, team building, continuous improvement, etc. should be part of a much earlier training. If a local workforce can hit growth targets where an offshored one can't, voila - greater value noted in $.

There's a good deal that can be done to give work local value that can't be replicated generically or overseas.

There are areas of high tech creativity that we still do rather well. There's social ingenuity combined with VC attitude that lets Americans create a Facebook or Amazon or Google much easier than other countries.

I like all ideas of trying to add value into the system and its structure, or I like fairly obvious taxation and wealth distribution schemes that hit a basic societal need.

Paying for base services is a societal need. Preventing or lowering unearned wealth between generations has a societal justification. Hitting some perceived % of pay equality is just fickle opinion - there is no obvious quantitative principle to base it on - it's just wet-finger-in-the-air social tinkering, with no real metric to say when you've succeeded nor any decent appreciation of the side effects.

Alternate Minimum Tax was one

PeraclesPlease — Sat, 03 Dec 2011 08:07:54 +0000

In reply to I'll just jump in here on the

Alternate Minimum Tax was one effort to fix this issue.

Secondly, part of the problem is that big businesses aren't paying much in tax, and so we're concerned about getting more out of them - but this one likely changes little. If my company is doing $20 billion in sales a year, whether I pay a CEO $10 mill or $40 mill is only 0.3%

Third, cutting off the top won't help the bottom. A simple way to fix this would be to tax high individual & corporate profits higher and create a better safety net & tax benefit that helps out the ones on the bottom. This can mean lower mortgage rates for low income workers, better health benefits to prevent out-of-pocket expense, better facilities available for everyone rather than say libraries gasping for air.

Of course that's a dream - we've got Norquist ruling America, convincing even Obama that cutting trillions from the budget is needed.

Turn the system upside-down.

MrSmith1 — Sat, 03 Dec 2011 07:57:03 +0000

In reply to Rethinking Income Inequality: A New Kind of Payroll Tax

Turn the system upside-down. In addition to raising the minimum wage, lower the maximum wage. Make the salaries for jobs be based on physical effort, rather than higher position (or higher brain function.) In other words, pay fry cooks and corporate mail-room trainees millions of dollars a year and CEOs the minimum wage. People would earn the most when they start out as go-fers and increasingly less as they become more successful. And you ensure they can't stay too long at the bottom by making it mandatory that bottom entry levels jobs can only be held onto for 2 years. Make the real status in society become how little you make, not how much. The incentive to work hard and become successful then becomes more about earning prestige and power than about money. Doing this allows the most money to be in the hands of the very young, who, as we all know, are the biggest, most eager consumers, thus stimulating the economy. But it also demands that people become more aware of personal financial planning, knowing that they will be earning less and less in the future, they need to make sure they plan ahead, save and learn to invest their money wisely.

Conservatives already hit Progressives with phony charges like: "They want to take all the money from the rich" and 'They believe in Socialist Economic Re-distribution', so, let's go all the way and really give them something to scream about. ;-)

I'll just jump in here on the

Oxy Mora — Sat, 03 Dec 2011 02:33:16 +0000

In reply to I called it a penalty, though

I'll just jump in here on the overall approach you suggest.

First, I think this kind of discussion is great. It's forward thinking in a positive way. As you suggest, to get a new product you have to do the brainstorming. I applaud you for initiating it. I wish we could do more of it in this context.

I have an overall philosophical question. Are we entertaining a new and creative solution because we have lost the moral authority to advocate for a progressive personal income tax rate?

I liked Peter's drift, shouldn't we back up and identify all the wrong things which were done to shift the balance of wealth and begin a long term progressive plan to reverse it. So much of the problem has been directly related to bank practices, regulations and the lore of masters of the universe and other forms of social justification for excesses. There are some significant opportunities to reign in the banks, as well as the justifications used to bloat them, and I think progressives should spend a great deal of time on that.

Very good points, Peracles.

Oxy Mora — Sat, 03 Dec 2011 02:13:55 +0000

In reply to So if I spend $5 million on a

Very good points, Peracles. Productivity, aided by high cap ex spending, is particularly high now, which increases profits and lowers overall wages. Wages as a percent of corporate income are at historic lows. Profits are at historic highs. So spending on "equipment" is helping the overall economy but not helping the folks doing the work. As you say, passive investors win, through dividends and price appreciation of the stock. CEO's, because the borrowing costs are almost nothing, can borrow money at low rates, use the money for stock buy-backs which increases share prices and in effect, is an implied dividend to share holders. Under any tax plan, CEO gross pay would increase and they would be making more money than before the stock buy back. Also CEO's have a neat trick where where they borrow money against a forward contract to sell their stock in a certain price range. This in effect gives them personal low interest money to play with as passive investors in the market, or whatever.

I should add that most of the above takes place in large, publicly listed companies. Executives in small companies by and large don't make enormous salaries. One of the overall reasons wealth distribution is screwed up is that large corportations, including large financial corporations, have a great many advantages and breaks that small companies simply don't have or are too small to take advantage of. And of course I mean small "make and sell" companies, not small financial firms who make money with money and pay a 15% tax rate.

Well, let me know if your

Richard the Electrician — Sat, 03 Dec 2011 02:13:54 +0000

In reply to No. Many successful people

Well, let me know if your restaurant needs a master electrician. I do travel, and I can make anything work.

See Bloomberg Nov. 30 op-ed

artappraiser — Sat, 03 Dec 2011 02:12:50 +0000

In reply to If we reduce the incomes of

See Bloomberg Nov. 30 op-ed by self-identifed very rich person, Nick Hanauer,

Raise Taxes on Rich to Reward True Job Creators

(He explains that he thinks the true job creators are regular people shoppers, and not the uber-wealthy shoppers, as the latter can only own so many I-phones, face creams and toasters. He uses "shoppers" instead of "consumers," and he means all the people in the classes below him.)

As I see it, there is no what-came-first-chicken-or-egg problem here, Trope. The loss of feelings of being "well-off" among the other less-than uber-wealthy classes - whether illusionary real estate wealth, credit wealth, IRA wealth or feelings of wealth due to a good secure steady job, or similar - made them tighten their pocketbooks which caused more layoffs after the shock of the banking crisis, which caused less buying, which caused more layoffs, etc.. Individual businesses are holding cash still now because they think there are still too few shoppers to buy more stuff; many small businesses know every day there are fewer shoppers and struggle not to let workers go.

People derided the "go shopping" thing after 9/11, but it is true that one of the things intended by the hit was to stop the western economies in their tracks by making people stop spending on travel and everything else. There's really no cogent argument that we are not a consumer economy. One can certainly argue that it's bad, but not that it is not our situation since post WWII. Economic growth was the masses buying more stuff, to the point of that thing called "planned obsolescence."

I remember I was kind of driven a little nuts by several people on TPMCafe (around 2009, probably) discussing what purchases they were going to "give up" in solidarity with the unemployed. Like it was Lent and they were Catholic, and somehow giving up some of one's usual spending would help -and curtailing usual spending was what they were talking about--i.e., give up coffee, candy or cologne, eat less expensive food, patch clothes instead of buying new, drop cable TV, cut your own hair, etc. I said: only if you give the money you saved directly to an unemployed person to spend will it help them, otherwise you're assisting in laying more off. One response was I was being "materialistic," that I should think about making do with less like the unemployed were. Way to go to help further crash an economy!

No. Many successful people

Donal — Sat, 03 Dec 2011 01:50:51 +0000

In reply to An income cap puts a cap on

No. Many successful people work for reasons other than money. Some even admit they would pay others to be able to do their jobs.

For example I'm designing a restaurant, and brought it home this evening, and am having much more fun than usual.

An income cap puts a cap on

Richard the Electrician — Sat, 03 Dec 2011 01:35:09 +0000

In reply to The maximum wage leaves them

An income cap puts a cap on achievement.

The maximum wage leaves them

Dan Kervick — Sat, 03 Dec 2011 01:29:46 +0000

In reply to It's not about 200-300k vs

The maximum wage leaves them no way up--no bonus, no raise, no nothing.

So what are they going to do? Quit? Fine. There are a lot more fish in that sea. One incentive for working hard is that, if you don't, someone else will take your job away from you. That's how most Americans live today. There aren't a lot of raises being handed out in contemporary America. But there are plenty of pink slips. I'm sure those poor CEOs and traders can find it in themselves to keep their noses to the grindstone if the choice is between a stagnant $200K salary or being marched to the pavement with the contents of their desk in a box.

But anyway, the 20-to-1 version of a wage cap does give people the opportunity to improve their economic lot in life. They just have to work with everyone else to do it together.

The same would be true with a national wage ratio cap - which would take care of the business of the investment bankers and lawyers. People can still get richer. They just have to do it together. If the top earners want to increase their income, they will have to get busy lobbying the government to invest in making the country more productive, and in raising the wages of the bottom earners. If they can make the wages of the bottom workers go up by $5000 in some five year period, they can raise their own incomes by $100,000 in the same period.

I believe we would be growing stronger and faster right now if we were continually re-investing the surplus produced by the very productive American workforce back into public and private enterprises, rather than siphoning off great gobs of it to pay the wasteful salaries of the most fortunate.