7 ms·

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

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.

dottedmag 10y ago
Don't you think CEO compensations will be even higher to compensate for higher taxes?
- toomuchtodo 10y ago
  You're going to burn through company coffers quickly if the top tax rate is 90% at some income threshold around 7 figures ($1-9 million/year). Precedent: http://www.politifact.com/truth-o-meter/statements/2015/nov/15/bernie-s/income-tax-rates-were-90-percent-under-eisenhower-/ 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."
  - nugget 10y ago
    A job is the means by which you convert human capital to financial capital. If taxes are raised on direct compensation, this conversion becomes less efficient. Talented executives would likely exploit opportunities to earn stock at artificially low valuations. You can do this by joining startups or private companies who typically have more flexibility with valuations. This could make public companies relatively less attractive to talent, and they could suffer as a result. To the extent that retail investors and pension funds have more access to public companies than private companies or startups, they could suffer as well. 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.
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  - nonbel 10y ago
    How many people actually payed that tax rather than finding some loophole though? I remember looking this up a few years ago and almost nothing was collected from that tax bracket... too lazy to check again now.
    - richardwhiuk 10y ago
      The idea we should abandon a tax policy because people find loopholes seems absurd.
      - ar15saveslives 10y ago
        The idea of taking 90% tax is absurd too.
        c0nducktr 10y ago
        I don't feel that it is. It's a marginal tax rate, not a flat 90%.
        candiodari 10y ago
        https://en.wikipedia.org/wiki/Club_33#Origin https://en.wikipedia.org/wiki/Club_33#Origin 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.
        Stratoscope 10y ago
        I'm actually in a tax bracket right now that is well over 100%. In fact, this particular tax can be as much as 12 million percent. 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.
  - valuearb 10y ago
    There were massive deductions, no one ever paid 90%
setum 10y ago
Ah, another bureaucratic solution. As if these work? Companies will start buying their CEO luxury apartments, yacht, etc... BTW this has been tried before: https://en.wikipedia.org/wiki/Revenue_Act_of_1942 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=0302fact https://www.ebri.org/publications/facts/index.cfm?fa=0302fac...
neogodless 10y ago
"You get what you incentivize." 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.)
- thrownblown 10y ago
  And if you want to start a yacht building economy, remove those taxes on yachts and those with the means will buy your country's yachts.
- mybrid 10y ago
  History tells a different story. When the income tax was first implemented it was not long ere any income over one million dollars was 100% taxed. During Eisenhower's two-terms in the 1950s the top tax bracket was 75%. It is interesting to consider that when the modern conservative wants to return to the American prosperity of the 1950s if, like you, conservatives would be willing to return to Eiesenhower's tax brackets and tax production. 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.
  - neogodless 10y ago
    That is interesting. I don't know if "what worked then will work now," but I'm definitely not sure of any theories about taxation! Human behavior and motivation continue to surprise us. Of course, arm chair philosophy about taxation is unfortunately ineffective in affecting policy change!
ksherlock 10y ago
In 1993, there was a legislative attempt to limit CEO pay by capping the deductibility at $1 million (the company could pay more but it would not be tax deductible as a payroll expense). That $1 million number was the average CEO compensation at large firms, which ought to tell you all you need to know about the effectiveness.

dottedmag 10y ago

Don't you think CEO compensations will be even higher to compensate for higher taxes?

toomuchtodo 10y ago
You're going to burn through company coffers quickly if the top tax rate is 90% at some income threshold around 7 figures ($1-9 million/year). Precedent: http://www.politifact.com/truth-o-meter/statements/2015/nov/15/bernie-s/income-tax-rates-were-90-percent-under-eisenhower-/ 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."
- nugget 10y ago
  A job is the means by which you convert human capital to financial capital. If taxes are raised on direct compensation, this conversion becomes less efficient. Talented executives would likely exploit opportunities to earn stock at artificially low valuations. You can do this by joining startups or private companies who typically have more flexibility with valuations. This could make public companies relatively less attractive to talent, and they could suffer as a result. To the extent that retail investors and pension funds have more access to public companies than private companies or startups, they could suffer as well. 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.
  - deleted 10y ago
    [deleted]
  - deleted 10y ago
    [deleted]
- nonbel 10y ago
  How many people actually payed that tax rather than finding some loophole though? I remember looking this up a few years ago and almost nothing was collected from that tax bracket... too lazy to check again now.
  - richardwhiuk 10y ago
    The idea we should abandon a tax policy because people find loopholes seems absurd.
    - ar15saveslives 10y ago
      The idea of taking 90% tax is absurd too.
      - c0nducktr 10y ago
        I don't feel that it is. It's a marginal tax rate, not a flat 90%.
        candiodari 10y ago
        https://en.wikipedia.org/wiki/Club_33#Origin https://en.wikipedia.org/wiki/Club_33#Origin 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.
      - Stratoscope 10y ago
        I'm actually in a tax bracket right now that is well over 100%. In fact, this particular tax can be as much as 12 million percent. 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.
- valuearb 10y ago
  There were massive deductions, no one ever paid 90%

setum 10y ago

Ah, another bureaucratic solution. As if these work? Companies will start buying their CEO luxury apartments, yacht, etc... BTW this has been tried before: https://en.wikipedia.org/wiki/Revenue_Act_of_1942 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=0302fact https://www.ebri.org/publications/facts/index.cfm?fa=0302fac...

neogodless 10y ago

"You get what you incentivize." 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.)

thrownblown 10y ago
And if you want to start a yacht building economy, remove those taxes on yachts and those with the means will buy your country's yachts.
mybrid 10y ago
History tells a different story. When the income tax was first implemented it was not long ere any income over one million dollars was 100% taxed. During Eisenhower's two-terms in the 1950s the top tax bracket was 75%. It is interesting to consider that when the modern conservative wants to return to the American prosperity of the 1950s if, like you, conservatives would be willing to return to Eiesenhower's tax brackets and tax production. 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.
- neogodless 10y ago
  That is interesting. I don't know if "what worked then will work now," but I'm definitely not sure of any theories about taxation! Human behavior and motivation continue to surprise us. Of course, arm chair philosophy about taxation is unfortunately ineffective in affecting policy change!

ksherlock 10y ago

In 1993, there was a legislative attempt to limit CEO pay by capping the deductibility at $1 million (the company could pay more but it would not be tax deductible as a payroll expense). That $1 million number was the average CEO compensation at large firms, which ought to tell you all you need to know about the effectiveness.