Friday, April 30, 2010

A modest proposal

When things go wrong, people get mad, and when people get mad, they make mistakes.

I just watched Bill Moyers on public television.  He showed a bunch of people saying they are mad at corporations, that corporations are looting the common people.

But corporations are just a form of social organization that is very good at raising capital and producing goods and services.

It is the ruling class who are looting the common people, a ruling class of interlocking boards and CEOs and lobbyists and Congressmen and just plain greedy people who have forgotten to reward the people who are doing the work because they along with almost everyone else in America bought into the notion that greed is good and that it’s okay to take more than your share.  I want it all now.  It’s time for you to get into me.

The problem is the ruling class and the American social values that have until recently validated the behavior of our ruling class.  Greed has been good since Ronald Reagan’s presidency, approximately.  We let them get away with it.

The solution is to bring the people in the ruling class down to earth by raising marginal tax rates to at least 75 percent on income over one million dollars.  Take the fun out of expropriating the employees and shareholders of their corporations, let the rich bear their fair share of cleaning up the fiscal mess Wall Street created (whether they’re on Wall Street or not).

If they want to take their money out of the country, they probably can, but the IRS is making it more and more difficult.  If they want to leave, let them go, it’s still a free country, relatively speaking.

The Tea Party movement and the Republican party are sucker’s games, talking about getting government off people’s backs, when all they’re really talking about is protecting the highly unequal status quo and keeping taxes low for rich people.  The bottom half of the income distribution already doesn’t pay federal taxes.

Tax rates in 1944, when the country faced a similar fiscal debt load (but less overall national indebtedness), were 94 percent on incomes over $200,000 (about $2.4 million in today’s dollars).

The problem is not corporations, it’s the people who run them.  Peter Drucker’s long-ago dream of “pension fund socialism” failed to materialize (i.e., in which the public controls the corporations through their massive pension fund investments).  The separation of ownership and control of the American corporation has been perennial since Berle and Means wrote their class book on it in the ‘Thirties. 

So let’s hit ‘em with taxes.  Let’s teach the ruling class a lesson. Let’s bring them back down to earth.  Let’s raise the taxes on the stratospheric portions of the incomes they pay themselves for products and services generated by the work of others. 

Maybe then corporations will return to the pay multiples of only thirty years ago, when the top dog got thirty or forty times the entry level income—as if he or she were a member of the same team, one might say—not a multiple of hundreds of times. 

America is a banana republic with nukes until the inequality is reduced.

Raise tax rates on the super-rich who have taken all the income gains for the past decade.

9 comments:

  1. "Raise tax rates on the super-rich who have taken all the income gains for the past decade."

    You are completely off-base. The damage has already been done. If i'm super-wealthy now I may actually be in favor of a high marginal tax rate - that way I will stay super rich and no one will ever catch up. We need a wealth tax - either directly or via massive property/luxury goods taxes. I see no reason to make the aspiring rich pay for the greed of the super-rich.

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  2. Raise tax rates on the super-rich who have taken all the income gains for the past decade.

    You are completely off-base. The damage has already been done. If i'm super-wealthy now I may actually be in favor of a high marginal tax rate - that way I will stay super rich and no one will ever catch up. We need a wealth tax - either directly or via massive property/luxury goods taxes. I see no reason to make the aspiring rich pay for the greed of the super-rich.

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  3. No, I don't think I am off base. If there is an "optimal" degree of income inequality, and we've far exceeded it, then we need to get back to it. There is evidence of significant productivity effects caused by the degree of inequality. I'm proposing a brute force way of imposing less inequality on an after-tax basis. Maybe after a while the pre-tax income distribution would become more equal, is the intention.

    In passing, I will note that I favor estate taxes with exclusions similar to those in existence now--on the order of five or ten million dollars. Beyond that invites the institution of a "landed" aristocracy.

    I'll also note that a Value-Added Tax, the infamous VAT, is basically a sales tax, and sales taxes are regressive. This is why the Establishment is pushing a VAT now for the U.S.

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  4. Estate tax is way too easy to get around (trusts, etc).

    I dont think raising income taxes will actually affect inequality at all. If we assume the super-rich are nearing the end of their prime earning years then the tax wont really hit them so wealth stays constant. If it then becomes harder for others to get wealthy i dont see how the gap can do anything but continue to expand.

    You are trying to fix a flooded boat by stopping the incoming water. That just doesn't really help. We need a "reverse bail out."

    I think we'll see this start to take care of itself as property taxes rocket into the stratosphere since states have nowhere else to turn for revenue.

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  5. I believe that the distribution of income reflects society's values, and that a change of values will ultimately force a change in distribution. I don't see why a corporate leader in America today is worth so more than he or she was thirty years ago, or than corporate leaders in other countries. Until the grip of the ruling class on corporate compensation is broken (as corporations are our major producers of income and product) the problem persists. One proposal is to have a mandatory vote on corporate compensation by shareholders. The vote would be mandated by law and would apply to all publicly held corporations. That's a start. The owners of American corporations are being ripped off by the managements, is the problem.

    Thanks for your comments, and good luck.

    cheers,
    Benign

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  6. Brodwicz,

    An income tax alone won't redistribute ill-gotten gains. To do that you need a wealth tax.

    You can get the wealth tax indirectly by running inflation and jacking up tax rates on capital gains. That way, you are taxing appreciation solely due to money printing, and not any economic growth.

    You can also get the wealth tax directly by imposing an explicit wealth tax.

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  7. This comment has been removed by a blog administrator.

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  8. But how will anything even remotely like this ever happen when the politicians are all corrupt and/or the ones with the ill-gotten gains?

    What is it going to take to fix it? Could voting ever force any government to act this way when the top end of town is the one calling all the shots and choosing who really wins elections?

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