California wants to tax companies for executive pay ratio
foxbusiness.com
foxbusiness.com
If you want to redistribute wealth, do it the honest way that doesn't distort markets. Take it from rich people and give it to poor people!
> The proposal would only apply to companies that post at least $10 million of taxable income from business conducted in California
Eg. lets says CA said you have to pay business tax if you make more than $X in CA, would that hold up?
Whether or not this can be gamed isn't the issue here. I think it's good to increase pressure on companies to treat their employees fairly.
Our company specializes in automating low wage clerical work.
I think we put over a thousand people out of work this year through our various engagements.
Consider when Steve jobs had a $1 salary but the rest was stock options. This tax would not apply in these instance, but should. Wed also find that it does apply when it shouldnt.
The biggest issue with any tax is the disproportionate impact on middle tier/s. The richest always find a way avoid it, and it doesnt target the poor.
the rich can afford the accountants that can minimize their "income".
the low income should theoretically have fair low tax rates.
You're left with the middle ground where people earn enough to pay significant taxes, but not enough to afford gratuitous tax accountants.
Not helped by lobbying determined to make taxes intentionally difficult in the US.
It varies year by year.
not only is it true, but most people don't pay income tax or pay very little.
the bottom 50% accounted for a measly 3% of all tax.
this is the same in the UK and other countries.
right now we use the top 1% as scapegoats for the borderline useless politicians.
Of course they do, that is a symptom of the problem. Take an absolute extreme of society: one person has all the wealth, and everyone else has nothing. Obviously, that one person will pay 100% of the taxes, and everyone else will pay 0%.
Today, we see a similar but less extreme situation. It's not intuitive at first glance, but think about it for a few seconds and it makes sense: if you want a more balanced distribution of tax burden across society, you need a more balanced distribution of wealth across society.
Accordingly, if you want the bottom 50% to pay more, you actually have to tax the rich more to reach a more equal distribution of wealth.
Then you don't have a society. You have one person who claims they have "money" while everyone else moves on with their lives.
Only if the only taxes are wealth taxes. You're in a discussion about income taxes.
wealth = income - consumption
In the U.S., we tax all three: general income tax, consumption tax (e.g., sales tax), and wealth tax (e.g., property tax). Taxing any one has an effect on the other, and a discussion about one is relevant to all others.
No, income - consumption is net increase in wealth. Those are all flows. Wealth is a stock. Wealth taxes are periodic taxes on the value of the stock, income taxes are taxes on the flow.
You're introducing periodicity, which I did not have in my simple model. Maybe a more complete model would be:
Wealth_N = Sum {i=1 to N} ((Income_i - Consumption_i)*CapitalGrowth^(N-i))
But isn't the real issue that 1 person is making a thousand times what everyone else makes? And wouldn't it be truly absurd to expect those 99 to pay more instead of the 1%?
If that 1 person was producing all the food for the other 99, I wouldn't find that to be a problem at all.
Things grow exponentially fast as you reach the top. If you look at the Forbes 100, Jeff Bezos is worth about 2x number 5, 10x number 40. [1]
The net worth of the top 1% is 10 million. That's 10,000x less than Jeff Bezos. The percentile/wealth graph is an insane hockey stick.
I don't doubt the 1% pay a big chunk of the pie. I do wonder if it's an amount proportional to their wealth, but let's leave the millionaires aside. I wonder what part of that 37% the billionaires are paying, and if _that_ is a fair amount.
[1]: https://www.forbes.com/forbes-400/#7795b4417e2f [2]: https://www.forbes.com/sites/jackkelly/2019/10/22/the-number...
Federal income tax is based on income, not wealth. It's entirely possible (and happens all the time) that wealthy people have a bad year with their investments and lose money. They don't pay income taxes on losses.
They should be paying a higher amount based on the amount of money they earned.
We could debate if they should be making so much %wise of total income.
You don't need to make much more than me for that to start become profitable - accountants, trust costs, etc eat up a relatively fixed amount of money. But once you exceed that cost then it's time to start shifting money around.
Not that this doesn't reduce the tax you pay on your income. it directly reduces your "income" itself.
IMO, if there was the will to build a better system there would be a better system. There's a lot of edge-cases in space travel, or medicine, but there was will to put very smart people with very powerful computers to work on both of these, and now we have rockets that land on drone ships and medications that can control HIV.
> The biggest issue with any tax is the disproportionate impact on middle tier/s.
How do other countries do it? There's countries with a healthy middle class, why isn't the US's thriving like theirs?
The system in each country is very complex and it's hard to tell which parts make it work better and which parts make it worse than another. The effects are all related.
First of all, the middle class is not well defined in many of the popular articles. There can also be a significant difference between middle class defined by income vs. by self-identification. See Figure 1.1 in [oecd]. I'd start with the premise that the US is an outlier in many areas - tax system, health care, pensions, education... All of which dramatically changes how the middle class is able to structure its finances.
My guess is that many of the US citizens have higher disposable funds in absolute value than Europeans but it helps them mostly in international travel and when buying easily transportable goods. Not as much in day-to-day living.
I'll try to compare with my country (Central Europe, laws similar to Germany's but with slightly worse execution). There's a healthy middle class but according to studies, it's shrinking. It seems middle class is shrinking worldwide. Even the [oecd] study I link is named "Under Pressure: The Squeezed Middle Class". I think this feeling also led to the rise of populist governments in many of the European countries.
I'll give some facts first, then try to interpret them:
- Effective tax rate at ~50 - 60 % for employees, ~30 % for IT freelancers. I'm including mandatory social and health insurance.
- Median wage: $15,500/year, typical IT wage around me: $30 - $60,000/year.
- Supermarket cashier earns 85 % of median wage, public bus driver at around the median.
- Served restaurant lunch (just meal) costs ~$7, dinner ~$10.
- Appartments cost (capital city) at around $300/sq ft
- Most (78 % [wiki]) of people own their housing (vs. 65 % in USA).
- Mortgage rates are at 2.5 % APR, some going as low as 2 % APR (10 years fixed), inflation at similar levels (last year around 2.8 %).
- I know personally just two people who went to private universities (one because he liked the school, the other one because it was easier) and no one who went to private primary or high school. The public schools are generally free.
- My family's out of pocket medical expenses amounted to $ 500 last year, mostly over-the-counter medication for our two kids (common cold, cough, supplements, vaccinations...).
- In hospital, you can pay around ~$10/night for the privilege of a private room but there's usually a shortage of them. There wasn't a shortage 10 years ago. People just weren't used to paying in hospitals.
- The medical services are free. There was a HUGE political fight around paying $4 flat for emergency (out of working hours) doctor visits.
- Fuel is taxed at 30 % extra to VAT, there are similar extra taxes for tobacco and alcohol.
- When you buy a real estate, you're immediately taxed 4 % of the value.
- Only 20 % of people use credit cards. Most of the credit is mortgages (which were mostly profitable due to rising prices so far) or car leasing. Outside of these bigger tickets, most of the credit seekers are low income.
I feel I live in a safe environment, the public transport is well functioning and clean (daily user). You can screw up, not save for some time, get ill and you're still likely to recover financially even if you work for a median wage. You may not be able to buy housing if your parents can't help you.
But in general, I think the ability to experiment a bit and a general feel of stability allows for much more effective negotiations with employers, even for comparatively lower income people, driving minimal wages down. On the other hand, because so big share of the money goes through the government, there are many inefficiencies.
If I moved for example to the US, I might end up in higher percentile of earners and most probably I'd have more money to spend on international travel and electronics. On the other hand there are the costs of the move (family away, frequent travel across ocean) and it would be partly paid off by worse public services and higher risks if unemployed/ill.
[oecd]: https://www.oecd-ilibrary.org/sites/689afed1-en/1/2/1/index....
[wiki]: https://en.wikipedia.org/wiki/List_of_countries_by_home_owne...
Someone tricked you. The US has one of the richest middle classes in the world. A CEO being paid obscenely has absolutely no impact on the middle class, it just makes a nice boogeyman for politicians.
Of course, by this metric the successful countries are all in Africa. It will be an interesting future.
When the English and the Germans came to North America and replaced the population there, was that a success for North America? If so, is it the kind of success you'd like to have someone else give to you?
Except that envy is part of the human condition, and arguably, a key component of human progress. Left unchecked, though, envy can lead to social instability. See, e.g., Kahneman and Tversky's work about how people are willing to incur harm to themselves to punish what they perceive as unfairness (sorry, no time to get the cite). So arranging our societal structures to keep envy in check might be necessary, even if it means giving some high earners a haircut on their income.
Huh?
That comment suggested
> The problem is that under the current tax scheme in the US people are taxed on their total income and companies are taxed on their profits.
and
> I think if we could just get rid of the income tax somehow (like have a land tax instead) the country would be so much better off.
Replacing the income tax with a consumption tax follows directly from both of those points. As to the first, it replaces the system where companies are taxed on profits and people are taxed on revenue with a system where companies are taxed on profits and people are taxed on profits. As to the second, obviously, it gets rid of the income tax.
What were you thinking your GP comment said?
Setting aside the oddity of talking about profit of people, given constant income, you pay less consumption tax as your profit goes up.
Consumption is expenses, profit = income - expenses.
Rearranging. Consumption tax = y * expenses = y * (income - profit) where y is the consumption tax rate. So, as profits increase, expenses decrease and consumption tax goes down.
> Consumption is expenses, profit = income - expenses.
No, a person's profits are their consumption. Savings are not profits -- they don't benefit you at all.
There's a chain going like this:
Company spends money so that company receives (more) money so that person receives money so that person can spend money.
The goal of the company is to accumulate money for someone else and that's how its profits are measured. Profit is money the company loses by paying it out to its owners. (Money the company loses by paying it out to non-owners is "expenses".)
The goal of the person is to spend money on things it can actually use; for the person, money is an accounting tool, not an end goal. But we can identify profit the same way. Money that you lose by paying it out to yourself ("consumption") is your profit; savings is just money you might one day allocate to profit.
On the other hand, I don’t think it would create much tax revenue.
We only gave our government the right to institute an income tax thanks to the idiots who banned alcohol. Before that the feds relied on alcohol taxes to survive.
Play stupid games, win stupid prizes.
https://www.heinzhistorycenter.org/blog/at-the-history-cente...
Let me paraphrase Adam Gopnik's recent book, "A Thousand Small Sanities: The Moral Adventure of Liberalism": When you talk about "the capital I pull in," you're risking celebrating the driver while taking cars, roads, and gasoline for granted. [0]
See also Elizabeth Warren's famous talk in her first Senate campaign: "There is nobody in this country who got rich on their own. Nobody. You built a factory out there - good for you. But I want to be clear. You moved your goods to market on roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory... Now look. You built a factory and it turned into something terrific or a great idea - God bless! Keep a hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.” [1]
And of course Barack Obama's correct statement, intentionally taken out of context by the right: "You didn't build that" (referring to the roads and bridges that businesses depend on). [2]
[0] https://www.amazon.com/Thousand-Small-Sanities-Adventure-Lib... (not an affiliate link).
[1] https://www.goodreads.com/quotes/439207-there-is-nobody-in-t... — also YouTube: https://www.youtube.com/watch?v=60fQCDqXfq0
[3] https://www.amazon.com/Economists-Hour-Prophets-Markets-Frac...
If you combine this with UBI + Single Payer + Free College -- then everyone will be able to afford the taxes they will pay on goods/services at the store/etc.
If the lowest safety net keeps just about everyone around 35-45k with medical safety, then they can probably afford 5-10k in VAT fees, and if they no longer peg benefits to companies -- people have more fluidity about where they work based on the fact they aren't going to lose their medicare for all.
This also means those who are fine not working and living on UBI ALSO drive up the rate of pay for those who DO want to work because supply/demand of workers will go down.
In the end countries spend a high percentage of GDP on thing people actually want. Everything after that is just deciding who pays for it.
PS: Consumption taxes also push people to vacation and retire in different countries.
Arguably not. The progressive tax bracket system means that a bare minimum amount of money (up to the lowest threshold) is available basically tax free to cover necessities and then everything above that is effectively profit for an individual. Living in an expensive house, eating expensive foods, raising a well resourced family aren't really expenses in the sense that businesses have expenses. If they were like business expenses people would try to minimise them, whereas most people I know actually try to maximise those costs when you look at what decisions they make. I've never convinced anyone with arguments that they should move into a cheaper house to save money. In that sense, both systems are philosophically the same but people have very low necessary expenses.
Almost an aside, but taxing people only on their savings would be truly bizarre. Someone measurably adds more to the economy than they consume and they are the ones who get shafted with tax? Ethically a case could be made, but practically the incentives are so nutty I'd hope it doesn't warrant serious discussion.
Taxing corporate revenue rather than profit would cause price increases and act like a consumption tax. Certainly possible, but that is a regressive tax policy and generally frowned upon.
It happens all the time, it's called property taxes.
Not exactly, if the government prints money, then the value of the dollar will decrease, but it the value of other assets will increase to adjust for the lower dollar value. So while printing money can be thought of as a tax on cash savings, it's not a tax on all assets (e.g., stocks, property, etc.).
Taxing savings makes sense over income. Why tax someone producing, removing the tax encourages more work performed. We tax income because it is easier. We tax the estate in death because everything is collected and recorded. In Roman times they sent a tax collector who would go through the home to find valuable objects to pay taxes (tax on savings).
It is not as wierd as it sounds. It's impossible to implement in our society before death and taxing payrolls and self reported income is a lot easier.
But that is a bad goal - we don't want to optimise economic flows, we want to optimise quality of life and standards of living.
The goal in this era of plenty shouldn't tend towards everyone teetering towards bankruptcy and wage slavery so that the politicians can talk about how the GDP is 2% higher. Everyone should have a reserve of real wealth in case they fall on hard times and the bigger the reserve the better as far as I'm concerned.
In my lifetime there have been a constant stream of inflationary collapses and a noticeable lack of problems caused by deflation. That theory is very popular with governments because it justifies the creation of money on a grand scale, but it has a certain lack of evidence. We've seen communism tried more often than deflation.
Heh it's a great idea for the powers collecting that spending though ;)
Perhaps in some cases, but many companies I know have "spend it or lose it" policies wrt budgets, so often money gets spent just to justify being able to spend more next year. And I've worked with a couple small companies that tried to spend more (legitimately) to try to avoid having as much profit to pay tax on. So not every business tries to minimize cost (or not as efficiently as you might assume).
Also the reason for the formation of most of the companies mentioned in the article is liability reduction more than tax reduction.
But the fix is easy. Wealth tax and/or UBI smooths it over and then we are set. You lost your family home, poo poo, but now get a nice stepand and can also afford appartments near where you work. You'll walk or bike more, be healther including mentally and socially (not isolated among neighbors richer than you in a dust trap), and spew out less C02.
Google's 401(k) plan is pretty much the most generous you are allowed to give to employees. They contract out for every non-professional role and keep a sharp distinction between the "help" that cleans and cooks, and the employees that code and do business development etc.
This is virtue signaling and not the most effective, but it does create a real incentive and being forced to hire less and therefore automate more low wage work would be a good thing.
Basically, this policy sets us up nicely for UBI.
People seem to think that governments should be solving all the problems on their own. But a democracy is a government of the people. If people don’t participate beyond just voting, they deserve what they get.
When you pay your taxes there is no disclaimer: "people have to participate beyond just voting". Your taxes is your participation by the social contract, the government needs to either deliver or stop collecting taxes and everyone will have to get their services from private entities (of course this is not possible).
While I agree that I definitely wonder where a lot of the money in SF goes, this "bigger than 13 states" isn't a particularly impressive statistic IMO. First, SF has a bigger population than 5 of those states. In many states depending on how they split responsibilities, per-capita budgets can be significantly higher at the municipal level than the state. Finally, SF is obviously a very expensive city, so getting things done (hiring people, works projects, acquiring land, etc.) is much more expensive than most states.
Still, SF does have to pay a lot more for workers these days thanks to its self-inflicted housing shortage.
The top 30 NBA players are earning a combined $1 billion per year in salary.
122 players in Major League Baseball are presently earning $10 million per year or more.
The NBA + MLB + NFL is around $14 billion per year in salary for the top 2,000 active players. Probably $200 billion in salary over the next ten years.
It's more than what the top 2,000 executives are extracting from corporations in the US.
I can't wait to see what the Lakers, Clippers, Kings, Warriors, Rams, Chargers, 49ers, Dodgers, Giants, Athletics and Angels look like after California makes things right.
Lebron James should only be allowed to earn a maximum of ten times what a janitor in the stadium earns or a secretary in the front office, were California to be consistent.
Oh wait, they won't do anything about that extreme inequality because no professional athlete would want to play for a California team ever again?
Saving this one for the next time I hear some canard about unions preventing top performers from their deserved compensation.
The current effect of the cap is mostly to redistribute some of that money to top 10-30 players who also get max contracts even as everyone knows they are not quite as good.
There are also competitiveness reasons to avoid true maxes like parity between the teams of relatively rich and poor/thrifty owners. But yeah the union does depress the salaries of the very best.
Of course I never said that, you did.
I'm very clearly pointing out the hypocrisy of California and its regressive, anti-human policies in action.
If they weren't hypocrites, they'd similarly cap athlete salaries based on the lowest paid employees of the team the athlete plays for - given the extreme pay imbalances in question. I believe the state officials proposing this are cowards and going after easy populist targets, so they'll never dare to act consistently and target athlete pay for exactly the same reason as executive pay.
Citizens can hardly run away from California any faster. It's so bad they're set to begin losing congressional seats for the first time in their history.
Liberal California may be losing population to conservative states like Texas, but conservative states like Texas are becoming far more liberal.
The reason is that executives decide other employees pay; the rule doesn't cap highest-paid-employee pay but executive pay. Higher paid athletes don't set the salaries of lower paid athletes.
What is the myth again?
[1] https://ktla.com/2019/12/20/californias-population-stalls-at...
Even within domestic migration - people leaving are poorer and people coming over are richer and wealthier.
The "exodus" stories are often peddled to tell a story on how productive people are leaving and there will be no tax revenues. But the opposite is actually true.
So, to summarize - 1) Net migration to CA is positive and 2) Net migration is actually bringing in more high income folks
https://calmatters.org/explainers/california-population-migr...
https://www.latimes.com/politics/la-pol-sac-skelton-income-t...
CEOs exist to help a company sell more product, while in sports the athlete IS the product. In that respect they have more in common with movie stars than with CEOs.
Which I suppose just raises the question of the rule applying to movie studios—a similarly unlikely scenario—and how CA can defend the inconsistency. Is there a loophole for sports/film in that the famous people are contractors and not employees? I don’t know if that’s even the case, just ruminating.
I agree that this is a difficult question. But why in the world is the government, with all it's perverse incentives, trying to figure this out? The shareholders, the people with a literal financial stake in the outcome, have spoken. Good CEOs are worth their weight in gold. Actually, gold isn't valuable enough. Steve Ballmer's resignation immediately added $20 billion to Microsoft's market cap. That's worth about 400,000 kilograms of gold.
• Are contractors counted as employees? If not, then companies would have an incentive to keep low-paid workers as contractors instead of employees.
• How is stock-based compensation, or other incentive-based compensation, treated? Executives are compensated largely with variable compensation like this in order to align their incentives (at least in the short run) with the company's. I could see SBC being exempted from this calculation, which would render the bill largely meaningless. For example, Steve Jobs took $1 in salary for many years.
• What about stock previously owned by the executives? That is, Mark Zuckerberg owns a ton of FB stock, so any income he receives via capital gains or dividends is not tied to his role as CEO. Presumably these are not counted?
The law would be agnostic about this because the worker is getting the benefits of employment so long as he/she is an employee of some company. This new proposed legislation would make it matter which company is designated as the employer, for purposes of ratio calculation.
Note: I have not been able to find the text of this bill, nor have I read AB5 (just read news about it).
Thus lowering their ration and tax obligations.
These jealousy based taxes are insane and have to stop.
Wealthy state, high tech industry (there was lots of Pharma in NJ). State starts to get really onerous on business, businesses start leaving, state goes into the toilet.
Other places need to be happening, too.
Yes, it is ridiculous.
There are certainly some aspects which are less attractive to business, but in the end, it's one of the best places for business.
If anything, it’s massively underegulated when put up against to comparably-sized economies in the developed world.
May I also ask what state are you from?
If all Californians say that people from Texas need to leave the country that is an insult, it is personal to the state of Texas just like someone saying that he's happy for the idea that California is losing business.
I strongly believe that in the knowledge economy, the traditional narrow definition of business friendliness (defined by low tax and low regulation) doesn't apply. That's why many states (e.g., Kansas) tried this tax based pull strategy which fell flat. In the 21st century, you need a more a holistic definition of business friendliness that takes into account talent as a stakeholder. Thus defining policies that make a place attractive for talent to migrate, should be part of the business friendly discussion. This will include non-competes, climate and environmental laws, labor protections, social safety nets, parental leaves, LGBT friendliness, other protections etc.
Then it looks like West Virginia and Texas are the most business friendly states, with California coming in 29th(despite being one of the nicest places to live in the U.S.).
You must know different people than me. But everyone I know who moved, moved because of a job, wanted to be in a cool city, or temperature/weather/availability of natural beauty. None moved because of non-compete laws, environmental laws, labor protections, social safety nets, parental leaves, or LGBT friendliness(I never lived anywhere especially rural).
Anecdotal evidence is irrelevant to the macro reasons on why job growth happens. Dig deeper into what is a "cool city"
And I'm pretty sure none of them were thinking about the non-compete laws or environmental regulations when they thought cool city.
Is that why everything keeps getting dumber and shittier to use after the company added machine learning, data science and data driven framework to their stacks?
They don't need to listen to people when they can just pretend they know what people want with their 'data stick'.
Obviously, majority of people know what they want. We are not just smart monkeys with terrible exploits, we are different and resistant to many short comings.
There is no historical context to look at. There is no reason to believe that something is a random occurence leading to a wide chain of events afterwards. Naturally, if you opened similar app to facebook now and deployed same strategy, tracking behaviour. You would get users at the same pace.
While I do think you have some valid points, intelligent people will move towards places of better quality of life and opportunities, I don't think it applies in the current example well. There are better places than California depending on metrics - homelessness, cost, pollution, transportation etc on quality of life. For opportunities, don't know but it can't be a hub for everything out there.
There is no logical explanation for such a line, it’s always an emotion against people who have more than them. Everyone always compares themselves to someone richer, whether they make 15k, 150k, or 1.5m. If you keep voting for such policies, you will eventually outlaw anyone for trying to do anything but living on government dole. It’s a sad future some people want. Venezuela collapsed rather quickly.
Are you saying that people who don’t earn few millions a year are doing nothing? Mind you, the majority of people are in this situation and contribute a lot to the society (teachers, doctors, researchers, any workers really). I’m not a leftist but I recognize the concentration of money in a few hands is probablematic, and a lot of business models to get to this point are harmful to the society at large.
The countries with higher teacher salaries, like Canada, or in our general vicinity all have low corporate taxes.
There are things we need to fix in the US, like people who don’t have healthcare, and the housing market. (All the losses in the share of GDP of labor since the 1980s went to landlords, not capital owners.) But it’s not clear to me that income inequality is in and of itself something worth fixing, at the risk of novel measures that could give other countries a competitor advantage over us.
Go check out primitive technology on YouTube and see the stuff he does in a forest. That kind of stuff is available almost anywhere with a temperate forest.
The cost of living is higher in the US because people expect better stuff and they've put a limit on how low the quality can go. Eg building permits and other housing regulations. All of that significantly increases the cost of housing, but it also makes your minimum housing much better than in poor parts of the world.
It’s arbitrary, and yet saying that means we should just let people pollute endlessly doesn’t make sense either.
Think of the corporate structure tree, with perhaps 5 to 15 people reporting to each manager. In a large company, there are many individual contributors per executive. With those numbers, total executive pay is not a large portion of total employee pay. This is what makes extremely high executive pay possible.
The fix is simple in concept, but politically difficult. Break up huge companies into smaller companies.
At least executive pay is. Amazon and Google have different ratios because Amazon has warehouse workers. Executive to worker pay ratios are more interesting in aggregate.
> The fix is simple in concept...
Companies age out and split themselves up on their own enough that it's probably better to just be a lot more restrictive on mergers. My fear with breakups is they can be somewhat silly. Breaking up AT&T just created regional monopolies and split local and long-distance. In the era of cell phones, this just looks weird.
You're also falling victim to Goodhart's law. Worrying about how much the 500 best-paid executives make doesn't explain why overall wages aren't rising, and that's what we should care about.
But I completely agree that company size and executive compensation are correlated, and it's an observation people don't bring up a lot. This ratio might be a better indicator of the size of companies than actual inequality.
Income inequality is dropping too. The share of income earned by the top quintile has dropped, and this shows in the Gini coefficient.
The above is to be expected based on unemployment numbers. For the first time ever, there are more job openings than people seeking jobs. This has come about because imports have been replaced by domestic goods (the tariffs helped) and because there are fewer immigrants to drive down the cost of labor.
I think this is actually one of the most important parts about the issue of "CEO pay ratio". Many people don't seem to understand that the ratio that's talked about is among the X largest companies and those companies have grown larger over the years. It makes sense why the pay of someone that needs to manage more people would go up.
One main reason: People actually pay the tax. So now, the government has an additional revenue stream, they villify the thing being taxed just enough to justify the tax but they still want the revenue stream.
Fossil fuel tax? Cigarette tax? Alcohol tax? Look at app the things people have stopped using/doing...
The Cobra effect is the term used to describe this logical fallacy. [1]
When you tax something, you are giving it legitimacy. You're saying:"Not only is this activity legitimate and socially acceptable, for the right to enjoy this activity, you need to pay the government that is enabling you to enjoy this right"
Solutions:
1) Make a law that lets employees sue companies (class action),where the executive pay gap relative to cost of living and value of skill/work (things the plantiff has to prove) can be used to estimate lost wages
2) Make it a felony (wage theft). Provided, the standard of living for any employee (or employees of contractors and vendors) fail to make an income that is N% lower than any other employee/exec.
There are studies that show that cigarette taxes reduce teen smoking rates, for example. A better example are all the corporate taxes that very clearly alter where corporations choose to operate.
Our company, for example, has specifically avoided opening up an office in California and New York City exactly because there are a number of regulations and that just make operating elsewhere more attractive.
I agree with your last argument, but companies like apple and google will remain and they might end up paying billions in taxes and shrug it off as an operating cost. Now, politicians will say a lot against wage gap but man...who's gonna mess with a few billion dollars of revenue, this is money they can say "I will do ______ without raising taxes" with
This whole "giving legitimacy" argument is why we have a war and drugs without needle exchanges. It's terrible counterproductive puritsanism that's been debunked countless times and cost thousands of lives.
Now, it is possible for governments to rely on punitive taxes in twisted ways, but this tends to be on the local level, small towns with harassing police forces. I would worry less in a huge rich state with many revenue streams.
What does the war on drugs have to do with this? Do you think taxing drugs is a solution? Why not legalize it without any tax, if it is harmful, require people to take it under medical supervision where they can get help with the real cause (if they choose to). That's such a straw man argument.
It's not just "poor" states that rely on taxes as revenue. Granted a small revenue stream has little power, but in this case not only would the revenue not be small but even if it was, large states are operated like large corps, this means no revenue stream is too small, it should at least be enough to cover for enforcement costs. Laws are meaningless without enforcement. If they're willing to pay the tax,guess what happens? Politicians start making unrelates promises counting on this revenue.
Bottom line, taxation is a means of revenue for a government. It is not a way of punishing people, you can't and shouldn't make punishment profitable for the punisher. That is a recipe for injustice. But if you do go ahead with this, the revenue should be used strictly for enforcement costs and to remedy the situatuon (in this case directly to the pocket of low level employees).
If the proposed law taxed the snot out of every company with very highly compensated employees I think it'd be more fair.
Then executives started motivating their VP salary with comparison of executive peers they have $500k so I should also have $500k or higher.
This causes income inequality which causes tensions in society.
In the past these type of income equality would be Kings, Noble men, then we transitioned to a period of more equality. Now its back again. You could say Kings and noble men have changed to ->high VP management layer in large corporations.
I think the term is Feudalism, where the ruling class has changed to VP from Noble men, Kings. https://en.wikipedia.org/wiki/Neo-medievalism https://en.wikipedia.org/wiki/Feudalism
High income inequality tears societies apart, I would advise not to go in that direction.
In page 5 of this Worldbank paper on income ineqality vs violent crime rate you can see a plot between inequality Gini coefficient, where a high number Gini is high inequality and crime rite. High income inequality is linked to high crime rates. https://siteresources.worldbank.org/DEC/Resources/Crime&Ineq...
Gini coefficient of inequality https://en.wikipedia.org/wiki/Gini_coefficient
This is a problem why? California is constantly in a draught. It's resources are stretched thin. It has housing crises all over the place.. wouldn't 'thinning' the herd or at least slowing business growth there be a good thing long term?
Why must a place with as many problems as California has in terms of fire/environment/housing always increase business, when those businesses could move out to other places bringing more diversity across America. Maybe try Kansas or Tennessee? I mean if trucking is ever replaced we'll need some good jobs in the heartland.