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Forum Post: 100-100 tax plan

Posted 12 years ago on Oct. 17, 2011, 5:41 p.m. EST by AMuse (5) from Mountain View, CA
This content is user submitted and not an official statement

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?



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[-] 1 points by gtyper (477) from San Antonio, TX 12 years ago

It sounds nice, in theory - but you the number of regulations to manage this would be nonsensical.

As a business owner there are several workarounds:

  • I would simply hire myself as a contractor and pay myself whatever

  • I would develop a contracting company that bid for the right to staff my company - thus blurring the line of who I'm employing.

  • I would utilize the company to buy things for myself rather than taking it as a salary.

  • I would headquarter my company in Bermuda or Ireland with more favorable laws.

  • I would outsource all functions.

That's off the top of my head.

What about issues of someone that is on the board of one company and the board of another and an executive of another? What salary do you use? The highest? The lowest?

You cannot legislate this. You can't legislate fairness. It's an impossible goal.

Not only that, but it's an infringement of the liberty and freedom of this country.

A better, more equitable solution to the problem is eliminating the payroll tax. A tax that seems to be there to be a disincentive hiring employees. This would have the net effect of reducing corporate taxes, but not on income. It would make hiring an American worker less expensive and thus more reasonable.

Additionally, close the "Free Trade" agreements. These are nothing more than propaganda filled legislation to export jobs to slave wage countries so they can later import the good back to America for consumption.

Legislating fairness is a losing battle. You'll spend more tax dollars hunting this down than the drug war.

[-] 1 points by AMuse (5) from Mountain View, CA 12 years ago

Yeah, I left out a bunch of the details for simplicity. None of the problems you mention are hard to solve.

Hire yourself as a contractor: salaries paid to contractors are included, both in the top (over 100x) and the bottom (baseline to calculate the 100x).

Companies buying stuff for personal use: there are existing laws to handle this. Things bought or given for personal use - including stock - would simply count toward salary.

HQ the company outside the US: it's the salary of the person that's taxed, as part of US taxes. If the person isn't paying US taxes, and yet is living and working within the US for most of the year - the simple version of that is already illegal, and something the IRS will clamp down on.

Outsourcing: include simple outsourcing in the calculations.

Someone employed by multiple corporations: use the salary of each one vs. the salaries that it pays. E.g., if you're making $2M at a company paying minimum $20K salary, and $1M at another company paying minimum $10K, then that $1M is taxable. It's all based on how much the individual person makes, regardless of sources of income.

This can be legislated. Yes, there will be workarounds - it won't be perfect, especially not right away. But it would be far, far better than what we have now.

[-] 1 points by LeanneC (62) from Fremont, CA 12 years ago

My whole issue with taxing the money away from large companies is that then the government has it. Until we fix our government, giving them more money is never the right answer.

Oh, and yea... the fact that it will probably promote even more outsourcing. What, do we make outsourcing illegal? Just too many laws on top of laws for me here.

[-] 1 points by HelicopterBen (15) from Santa Barbara, CA 12 years ago


[-] 1 points by AMuse (5) from Mountain View, CA 12 years ago

Just trolling (it's known that The Powers That Be pay people to astroturf forums like this and shout down any good ideas), or do you have an actual reason why this wouldn't work?

[-] 1 points by ARod1993 (2420) 12 years ago

I think that sounds like a definitely strong proposal. I'm a believer in Ben and Jerry's 40-to-1 plan as well, and to hear it coming from someone else is music to my ears.

[-] 1 points by AMuse (5) from Mountain View, CA 12 years ago

Thanks. It's arguable whether even 100 times is too much, but I picked that for two reasons: it clearly targets the worst abusers, and it makes for a sound bite title ("100-100"). I wish the second reason was not as vital toward making it something the media might give air time to, but it is.

[-] 0 points by tesn1 (212) 12 years ago

The Idea would create a society of part timers. I would not work. Remember business is out there to make money. Your idea would strip away capital to expand, hire more employees, and encourage an employer to keep every one as a part timer (paying even less)