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California wants to tax companies for executive pay ratio
- thrill 7y agoIt's an Ayn Rand novel come to life.
- egypturnash 7y agoYou say that as if San Francisco is not rapidly turning into Galt's Gulch already.
- sudhirj 7y agoThink you’re both looking different sides. OP is saying that CA is becoming a parasitic government that taxes the producers for being so awesome, and you’re saying it’s the haven for producers where they can be free from parasitic government.
- libraryatnight 7y agoridiculous pay ratio is not indicative of being an awesome producer.
- egypturnash 7y agoActually I’m thinking it’s more like this. http://www.angryflower.com/atlass.gif http://www.angryflower.com/atlass.gif
- deleted 7y ago[deleted]
- big_chungus 7y agoThis is completely inaccurate. Galt's Gulch is an insular community populated by people who largely support themselves. No real gov't or tax system. It's basically the stereotypical ancap paradise. SF is going towards the other end; did you even read the book?
- apocalypstyx 7y agoWhich, to be fair, can only function, even in the context of the story, by relying on a fictional device that would effectively provide free energy (in massive quantities) for the lifetime of the conceivable universe, with no side effects.
- dang 7y agoPlease don't take HN threads further into ideological flamewar. We're trying to avoid that here. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html Note also the guideline against "did you even read" comments.
- dang 7y agoPlease don't respond to a bad comment with another bad comment. That just makes the thread worse, and the site guidelines explicitly ask you not to do it. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- throwaway724 7y agoOh, you mean the discredited pop-psychologist who practiced almost none of what she preached, yet somehow influenced an entire generation of sociopaths?
- dang 7y agoPlease don't take HN threads further into ideological flamewar. We're trying to avoid that here. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html Note also the guideline against being snarky.
- dmode 7y agoAhh, the Ayn Rand reference. The most useless book ever written
- dang 7y agoPlease don't respond to a bad comment with another bad comment. That just makes things worse, and the site guidelines explicitly ask you not to do it. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- dang 7y ago"Eschew flamebait. Don't introduce flamewar topics unless you have something genuinely new to say. Avoid unrelated controversies and generic tangents." https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- cft 7y agoAt some point California will hit the socialist threshold that will interfere with its main revenue source, Googles, Facebooks etc. It is at that time that the encampments will become permanent favellas, like in Venezuela or Brazil.
- m-p-3 7y agoAnd the current situation is pushing the income inequality to unparalleled levels. IMO this is just a reaction to an imbalance, because clearly the market is unable to balance itself.
- cft 7y agoIncome inequality now is much less than during Astor and Rockefeller times. Yet the homelessness and the relative poverty is worse.
- m_ke 7y agoI don't have the stats but I'd assume that the cost of living has also gone up in the largest cities along with the density.
- aantix 7y agoWhy does it need to balance itself?
- NeonVice 7y agoA government middle man is not going to reduce income inequality. First, we need to decide whether or not inequality is necessarily a bad thing if everyone's situation is improving. Otherwise, it just comes off as covetousness. Second, we need to evaluate if mental health/drug rehabilitation facilities would solve a lot of the homelessness problem. Third, we need to reduce government restriction on building to put some downward pressure on housing costs or encourage people to establish employment or businesses in areas that are more economical.
- jophde 7y ago
- egypturnash 7y agoNiiiice.
- meddlepal 7y agoAs a non California resident I love the idea of California making itself more business unfriendly.
- RangerScience 7y agoHonestly as a California resident there are ways that I agree. Other places need to be happening, too.
- raverbashing 7y agoBut while your ability to get funding is 10x if you have an office in a certain geographical area, there will still be incentives to being there. Because sure, the chances of success for your gig economy app for mimes is much greater if your developers are working in the Mission and eating avocado toast for breakfast, so here's a million dollars, go build it Yes, it is ridiculous.
- andrewprock 7y agoCalifornia has to be one of the most business friendly states in the US. It's the #1 GDP state in the use, and the #8 GDP per capita state in the US. There are certainly some aspects which are less attractive to business, but in the end, it's one of the best places for business.
- meddlepal 7y agoYes, right now it is. Nothing lasts forever.
- andrewprock 7y agoToo true. And no one expects the Spanish Inquisition.
- dmode 7y agoHave been hearing this for 20 years
- ravenstine 7y ago
- arkadiyt 7y agoWealth inequality is real and I think it's good to have some sort of pushback on it, pay ratio caps or otherwise. At the same time California is so stupidly dysfunctional that I don't think they deserve any more tax revenue - San Francisco alone had a higher budget in 2019 ($12 billion) than 13 entire states, yet absolutely nothing gets done.
- jophde 7y agoThey cannot even manage shutting down a blatant stolen goods market / fence on 15th and Mission.
- labster 7y agoThis is objectively false, of course. Governments do get things done all the time, even if policy changes you want are not happening. Even as hyperbole, your statement serves to fray the social fabric. 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.
- ravenstine 7y agoI dunno. When my state ends up with more homelessness and sanitation problems and police ignore low-level crimes, I'm not inclined to give it more money.
- seibelj 7y agoThere is a popular argument being made that any amount of inequality is evil and must be stamped out. I’ve asked several people to define in logical terms the line beneath which someone is not evil, and above which they are an evil rich person taking too many resources. 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.
- tasogare 7y ago> outlaw anyone for trying to do anything 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.
- seibelj 7y agoI understand your emotion, it’s coming through clear. At what salary do we need to seize someone’s further income out of fairness?
- joshuamorton 7y agoDepends on your ethical framework. A utilitarian could claim that after the point where the marginal value of the dollar to the rich person is so low that seizing it results in higher global utility, even taking into account the angst and disincentives on the rich as a result. Is society better off if you take 100 mil in income from Larry Ellison and Sundar pichai and build a few hundred units of low income housing? Even if it pisses off ellison and Google pays pichai less the next year?
- 7y ago
- human_banana 7y ago"Hey, lower paid employees you're fied, but now you now work for FooBar Services, and we've hired FooBar to do the work you're currently doing." Thus lowering their ration and tax obligations. These jealousy based taxes are insane and have to stop.
- ummonk 7y agoPretty much. This will exacerbate the practice of hiring high paid white collar workers directly while contracting out to staffing firms for low paid positions.
- newguy1234 7y agoThis is so funny but it is very true. I work as a tax auditor and I see more and more companies doing his. They restructure the entire business to optimize for certain benefits. For example, all of the real estate will be structured in separate entities to protect from liability. Same thing can be done for taxes. Gets even worse when it is a foreign parent that controls all the subs. You can't audit the foreign parent and the domestic subs have minimal tax exposure.
- deleted 7y ago[deleted]
- WalterBright 7y agoCalifornia already taxes the company profits and the salaries of the executives.
- gnicholas 7y agoTrue, although this would also capture revenue from companies whose executives don't live in CA, and therefore pay no taxes there. This actually raises an interesting constitutionality argument — it's arguably an indirect tax on the income that would have been paid to a non-resident executive. Sounds sort of like taxation without representation, but this is probably too much of a stretch. (I used to be a tax lawyer.)
- stickfigure 7y agoThis is just so... weird. The obvious unintended consequence is to fire the lowest-paid workers. Outsource it to contractors, automate, whatever. Why does the ratio matter? 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!
- danmur 7y agoIt does seem like it's open to manipulation. More money for lawyers and accountants.
- olliej 7y agoI mean it also requires the companies to be incorporated in CA, but Delaware has gone to great lengths to make it super easy to be "a Delaware company" w/o any actual meaningful proportion of the business there.
- gnicholas 7y agoBy my reading, it applies regardless of place of incorporation: > The proposal would only apply to companies that post at least $10 million of taxable income from business conducted in California
- olliej 7y agoI'm just not sure how the various US courts would interpret that? Eg. lets says CA said you have to pay business tax if you make more than $X in CA, would that hold up?
- desdiv 7y agoThe status quo is that every company with operations in CA has to pay the CA corporate income tax based on its CA-derived taxable income. This is true regardless of where the company is incorporated. This is also broadly true for every state that collects state corporate income taxes i.e. they use their tax authority to levy tax on business activities conducted within their state.
- Trias11 7y agoD-word ain't selling me any more of their taxes and delusions. Moving to Nevada next month.
- ummonk 7y agoSeems like it's something to incentivize owners (e.g. Abigail Disney) / founders at the expense of executives? Non-founder executives tend to be somewhat parasitic leeches / mba types, so I can't say I'd be unhappy with them getting payed less. That said, this sort of initiative seems to be part of a pattern of poorly thought out attempts to attack "income inequality".
- onetimemanytime 7y agoProbably just another way to raise taxes and bill it as a way to help the poor. Execs usually get a % of the gains during their rein so they re not leeches. Disney can also pay a John Doe with a high school diploma to run Disney for $240K a year. But they'd rather pay $50+ Million for Iger et al because so far if has paid off.
- RiOuseR 7y agoTypical California, just adding another tax for the sake of taxation... Jesus this state is doomed
- gnicholas 7y agoI can't find details on this bill, but as a former tax lawyer, I am wondering about these issues: • 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?
- dweekly 7y agoIt may be worth noting that as of two weeks ago AB5 makes the "just recharacterize your employees as contractors" play much more difficult.
- amluto 7y agoI'm not sure this is relevant. You can bring in an outside company as a contractor, and that company can have employees that effectively work for you but aren't employed by you.
- gnicholas 7y agoDefinitely true. As other commenters have noted, you can just outsource the function to another company. That is, I don't think AB5 has any impact on a worker who is an employee of a janitorial firm that is contracted to a tech company. I think it only applies to workers who are directly contracted with/employed by the main company itself. 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).
- 7y ago
- JMTQp8lwXL 7y agoLots of excitement in the comments. Has anyone considered the possibility that California wants to create the appearance of solving real problems, without actually solving them? Politics, like social media, contain quite a large amount of virtue signaling. What places California somewhat uniquely is as its liberal ethos clashing with moneyed interests. There's the Abigail Disney's out there, but wealthy egalitarians are vastly outnumbered by wealthy capitalists who oppose redistribution. As many others have pointed out, there are potentially obvious workarounds to optimizing for expensive pay ratio.
- Trias11 7y ago@GavinNewsom must be running out of funds for more hair gel.
- tropo 7y agoExecutive pay ratio is mostly determined by the size of the company. We have allowed mergers and more mergers, even ignoring monopoly concerns, creating huge companies. 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.
- Marsymars 7y agoIt’s staggering how much the sizes of mergers and acquisitions have grown. Looking at inflation-adjusted numbers, there’s the anomalous $15B purchase of Carnegie Steel by US Steel in 1901, and then nothing >$1B until the 1960’s and nothing >$10B until the 1980’s.
- dehrmann 7y ago> Executive pay ratio is mostly determined by the size of the company 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.
- tropo 7y agoOverall wages are rising, particularly at the low end. Wages are growing at about a 3.7% annual pace. 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.
- deleted 7y ago[deleted]
- refurb 7y agoMaybe it’s just me, but California’s future seems to be echoing New Jersey’s. 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.
- rayiner 7y agoIt could happen. Remember, Silicon Valley was founded in California when the state was solidly Republican.
- newguy1234 7y agoAlso many other states are starting to have "tech hubs" as well like Austin and Nashville so one would expect the allure of the bay area is going to decline overtime.
- foogazi 7y agoHow does more corporate taxes help raise people’s wealth levels?
- newguy1234 7y agoPeople are expecting the taxes to fund welfare programs.
- AdrianB1 7y agoWelfare programs don't increase wealth, they just (barely) keep some people afloat. Don't give them a fish, teach them to fish.
- herostratus101 7y agoI'm all for anything that causes an exodus of companies out of California.
- TheMagicHorsey 7y agoCalifornia will actually succeed in driving away its wealth-generating companies at some point. A lot of places will be happy about benefitting from the exodus. California has way too much concentration of brainy people. We need to spread them out across the world. These kinds of policies will succeed in doing that.
- LessDmesg 7y agoThe key of the matter is that California wants to tax, full stop. The socialist greenies running the state are neck deep in debt and making new exorbitant taxes is their only option. No wonder people are fleeing from the Californian dream in droves! https://www.nytimes.com/2020/01/16/us/california-congressional-seat-census.amp.html https://www.nytimes.com/2020/01/16/us/california-congression...
- dmode 7y agoHow did the population go up by 2 million of people are leaving in droves ?
- AdrianB1 7y agoLet's present a new thing called immigration: people coming from other countries. When you come from Honduras, even a slum in LA is a step forward, so people are moving from countries like Honduras to California. How many have any education, get good jobs and pay taxes is usually ignored because it does not look good to look in the dirt, you put it under the carpet.
- m0zg 7y agoI actually lived under the end state of this process: the Soviet Union. There _everyone_ worked for the government and made similar money (peanuts). Janitor? Here's 70 rubles a month. Engineer? Here's your 120 rubles. Run a factory? Here's 200. No "inequality" woo-hoo! Socialist utopia! Didn't work too well though.
- sample2448 7y agoWe had our vaccine from "socialism", let americans have one too :)
- acd 7y agoGood with the change in California. I have seen a time trend where upper management started to get paid $100k per year, then it was $250k per year, $500k, $1M, $10M. 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/Neo-medievalism https://en.wikipedia.org/wiki/Feudalism 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&Inequality.pdf https://siteresources.worldbank.org/DEC/Resources/Crime&Ineq... Gini coefficient of inequality https://en.wikipedia.org/wiki/Gini_coefficient https://en.wikipedia.org/wiki/Gini_coefficient
- gremlinsinc 7y ago> President Rob Lapsley said the bill would keep companies from coming the state. 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.
- badrabbit 7y agoTaxation as a punishment or as a way to stop people from doing something is does not work. 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. [1] https://en.m.wikipedia.org/wiki/Cobra_effect https://en.m.wikipedia.org/wiki/Cobra_effect
- koheripbal 7y agoI think your general argument, that taxes don't change behavior, is too vague to be so broadly accurate. 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.
- badrabbit 7y agoMost people who smoke don't even know cigarettes have a special tax. It costs what it costs, a little than a bigmac at mcdonalds for a pack of cigs and less than six-pack of beer. 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
- RickJWagner 7y agoIt's not right to penalize only C-suite employees. For instance, lots of actors and entertainers in California make tons of money, and they're notoriously hypocritical about social issues. (i.e. flying in a private jet or living in a constantly-irrigated oaisis, but still pontificating about climate change). If the proposed law taxed the snot out of every company with very highly compensated employees I think it'd be more fair.