Forum Post: Tax the Divergence

I am throwing this out as an option to look at...Tax the Divergence...I will explain. I propose that on the corporate level we do not tax profits or dividends - we want our companies to make a profit and stay viable and pay their investors. I propose that the corporate tax be based on the divergence in income between executive compensation and production level compensation. On the simplest level what this does is help avoid funneling dollars through the government to re-distribute. It helps to foster the direct divergence from upper level to lower level wages. Keep this divergence within an acceptable range and no tax could potentially be paid. The higher this divergence, the higher the cost to society ultimately- so the higher the tax that should be owed.

This divergence between upper and lower classes costs society and governments in more ways than we can even list here. Suffice it to say that preventative measures implemented by utilizing the corporate tax code versus later redistribution and assistance needed from a complex and expensive myriad of government programs is the same as the difference between preventative medicine and vaccines versus surgery and epidemics.

This divergence in compensation was roughly a multiple of 30 times approximately 50 years ago. This had risen to a multiple of over 80 times in 1970 to over 349 times in 2004 and is even higher now exceeding 500 times in some instances.

Here in lies the root of our economic problems because here are the individuals that can purchase influence in Washington, as can the companies they now control. At the same time it would not be good to limit corporate compensation directly - let us just redirect the emphasis on the desired outcome using the tax code.

As a country we have led the world historically in innovation in democratic government, in industrialization, in entertainment, in technology and it is now time to lead in innovation in our tax system. Let us be proactive and preventative. Tax the Divergence