that is a sweet way to fail. don't blame her, though. there is only one real solution to this problem, unfortunately: much higher taxes once you start raking in absurd dollars. odds of that happening in US in near future: low.
Precedent: http://www.politifact.com/truth-o-meter/statements/2015/nov/...
"In 1944-45, during World War II, couples making more than $200,000 faced an all-time high of 94 percent. Sanders said income tax rates under Eisenhower were as high as 90 percent. A look through the records shows that top earners in the eight years of Eisenhower's presidency paid a top income tax rate of 91 percent."
If you theoretically limited all compensation then you would distort the market in other ways - beyond a certain amount of cash and stock compensation (taxed at confiscatory rates), I would start to optimize for things like multiple secretaries, nepotism, a massive office, and other items which wouldn't necessarily help the business.
edit: and I realize I originally used the word "found"
So what I mean is that last time they had high marginal income tax rates holding shares would simply entitle you to a number of benefits, a famous one of which is Disney's Club 33. Lots of things were available though. Yachts, ski cabins, ... Needless to say, zero tax was paid on this.
So good luck with that 90% tax rate. Not going to happen.
I got caught in this when I turned 65 and signed up for Medicare Parts B and D.
This tax is the Income Related Monthly Adjustment Amount (IRMAA). The IRMAA tax is applied in increasing levels as your income goes over certain amounts. But it's not a marginal tax like income tax brackets where the higher rate applies only to your income over the bracket, and the tax rate doesn't change for income below that.
Instead, the IRMAA tax takes a hard jump of $1216/year as soon as your income goes one penny over the line. That one penny of additional income costs you $1216 in IRMAA tax. In other words, the tax on that penny is 12 million percent.
In my case, it wasn't quite so bad. I'm about $1800 over one of the IRMAA income levels. So that $1800 cost me $1216 in IRMAA tax, but I still have to pay federal and state income taxes on the extra $1800. Add it all up, and the total tax on that income is over 100%.
It is a strange thing, and I say downright evil, that my take-home pay goes down when my gross income goes up.
Imagine an income tax model where everything less than $200k was untaxed, and everything above $200k is taxed at 20%, and tax is always rounded down towards the next cent value.
Thus $200.04 pays 0 tax, and $200.05 pays 1 cent tax. That 1 cent is '100% taxed', but given that would exist no matter what values you choose, it's not a helpful way of describing the taxation.
What is your salary, btw? 60k for sitting in cubicle and browsing reddit is absurd for the rest 6-7e9 people, that live outside of our lucky wealthy western world.
If you want efficient production, you don't tax production. You tax consumption. While I may personally think million dollar paychecks are silly, and that the value created doesn't align with the compensation, I'm not convinced that increasing taxes along with income (i.e. loosely correlated with production) is the way to go. Instead, tax consumption.
In other words, if you're going to get taxed all to hell to buy a pointless yacht and $250 million homes, you might not want to do that, quite as much, so you might not care as much about making an extra $20 million, so you might not negotiate such an obscene paycheck. (Maybe you'd even care more about the value you bring to the table and the humans in the picture.)
A better historical argument can be made that America should have never switched from a dividends approach to the stock market during the late 1970s. Our current system rewards quarterly gains for long term losses and this has lead to the various bubbles. I can easily argue we should return to Eisehower tax brackets and also a dividends approach to stock market gains and in doing so history is on my side.
Currently the effective rates are fairly close to the past for high wage earners, lower for low wage earners.
>...In 1958, approximately two million filers (4.4% of all taxpayers) earned the $12,000 or more for married couples needed to face marginal rates as high as 30%. These Americans paid about 35% of all income taxes. And now? In 2010, 3.9 million taxpayers (2.75% of all taxpayers) were subjected to rates that were 33% or higher. These Americans—many of whom would hardly call themselves wealthy—reported an adjusted gross income of $209,000 or higher, and they paid 49.7% of all income taxes.
>In contrast, the share of taxes paid by the bottom two-thirds of taxpayers has fallen dramatically over the same period. In 1958, these Americans accounted for 41.3% of adjusted gross income and paid 29% of all federal taxes. By 2010, their share of adjusted gross income had fallen to 22.5%. But their share of taxes paid fell far more dramatically—to 6.7%. The 77% decline represents the single biggest difference in the way the tax burden is shared in this country since the late 1950s.
http://www.wsj.com/articles/SB100014241278873247051045781516....
Most economists who say that are responding to incentives.
It's a rare economist who would admit in the same breath that this 'inefficiency' coincided (not coincidentally either) with the highest growth rate in recent American history.
BTW this has been tried before: https://en.wikipedia.org/wiki/Revenue_Act_of_1942
It was then, that the employers started giving free insurance to get around wage cap, and seedlings for present healthcare mess were planted.
https://www.ebri.org/publications/facts/index.cfm?fa=0302fac...