Forum Post: 100-100 tax plan

Just tossing an idea out, that we might rally around.

What if we taxed, at a rate of 100%, all personal income from a corporation in excess of 100 times what that corporation's lowest-paid employee was paid?

There are a lot of details, but that's the gist of it. It's about making clear that we don't hate all the rich, but just the rich who got that way without earning it. It rejects the notion that a CEO is more than 100 times as valuable as a line worker: a CEO may ink billion dollar deals, but those deals would not exist without all those workers. It allows companies that make record profits to reward their executives, if and only if they spread those bonuses all the way down the chain, and makes it clear to companies that don't have enough money to spread down, that they don't have enough to make large executive paychecks healthy for the company, no matter what the executives claim.

Any executive who would leave the US rather than pay this tax, does not deserve the protections of America that enabled him to profit. Any company that is unable to pay "competitive" salaries for "top talent" because of this, was hiring executives who cared little about the actual health of the company. Any corporation that is "forced" to lay off its line workers rather than pay them what they're worth, will soon find that it has committed suicide, by being unable to serve its market without its workers - and most executives aren't dumb enough to actually do that, no matter what they threaten. (Ever dealt with kids who said they would kill themselves if they didn't get their way? Some executives never grew up.)

Now for some details.

The exact line I propose, is 100 times the lowest full-time equivalent wage or salary, with hourly wages counted at 2,000 hours/year. Say you're a business owner who hires a summer intern, paying $10/hour for 160 hours (4 weeks of 40 hours each). For this line, it doesn't matter that you paid $1,600 total, but that you paid $10/hour: the line is 100 times $10 times 2,000, or $2 million. So you can pay yourself up to $2 million, only paying normal taxes. This works out for small business owners, who are sometimes lucky to pay themselves at all after paying their employees. The large businesses where the top tiers get paid $20 million per year are another story.

Naturally, this includes all income derived from a corporation, including but not limited to base salary, bonuses, stock, and the fair market value of perks such as company cars. Someone paid by multiple organizations can pick one to draw the line from, up to the limit of how much that organization paid that person - though, being paid by one organization to manage another uses the lowest pay rate of both organizations to draw the line.

This only applies to money on which American income tax is paid. Much as we might sympathize with the problems of laborers in other countries, it might be best to only calculate this based on what the company paid workers within the United States.

Companies will try all kinds of shell games to get around this, for instance by outsourcing their line workers to contract firms so they don't actually "hire" anyone who's making minimum wage. The simplest shenanigans should be anticipated and made illegal before anyone actually implements them, with taxes being calculated as if the shell games never happened, with fines and/or jail for egregious or repeated attempts. More advanced runarounds are inevitable, but the costs of those will discourage most of the corporations that today simply hand their executives obscene paychecks.

The specific legal language should refer to any organization that employs people, rather than just "corporations". Likewise, it should refer to anyone who is employed by an organization, not just "executives" or "CEOs".

This applies to all income a person receives, including capital gains. (We should advocate the repeal of capital gains tax, treating it as ordinary income - because, for many financial professionals, it is. But let's keep that separate.) It overrides all other tax rates when its circumstances apply, including those from laws yet to be passed, unless the relevant law explicitly overrides this one. The remainder of a person's income is taxed as if that remainder had been the entirety of that person's income.

So, what do you think?