4 ms·

One problem. Let's say I own a corporation and the corporation decides to use it's profits to purchase a G5 Jet, a mansion, a fleet of limos, an entertaining bu

One problem. Let's say I own a corporation and the corporation decides to use it's profits to purchase a G5 Jet, a mansion, a fleet of limos, an entertaining budget, etc. I'm essentially going to live like a king tax free. While I wouldn't technically "own" the items I would benefit from them. How can you regulate benefit? Where do you draw the line as a costs of doing business and a direct benefit to the CEO?

yummyfajitas 15y ago
As of 1986 (in the US), such things are taxed as compensation. Before 1986, most compensation to corporate executives was given out in such forms. In many other countries, executive wages are lower and the difference is made up with non-wage compensation such as what you describe. Incidentally, this change in tax law created the biggest spike ever in (measured) income inequality: http://www.scottwinship.com/1/post/2011/03/what-would-it-mean-for-theories-of-us-income-inequality-growth-if-the-us-experience-has-been-similar-to-that-everywhere-else.html http://www.scottwinship.com/1/post/2011/03/what-would-it-mea...
- patio11 15y ago
  This is very much in evidence if you know e.g. any Japanese CEOs. Our CEO (old day job) was bragging at a meeting one day about the $X00,000 car he drove, and then said "Remember, I work for a living, that's the company's car." It will continue being the company's car for the duration of his tenure with the company, and after he is CEO emeritus and on an advisor-to-the-board position he will naturally be given a new company car, and ... It also gets straight-line depreciated at, probably, 95 ~ 100% business use. (This is considered standard business practice here, in the same manner that an American businessman expensing a WSJ subscription would be totally-inconceivable-to-challenge standard business practice. When I bring in my income tax return in March I'm probably going to get chided again by the tax office for "forgetting" so many of my deductions.)
leot 15y ago
Well, then just Tax Wealth (and set cap gains rates to 0% while you're at it). If the limos and G5 jet that your company bought were inefficient assets, then as an owner of the company you would still have to pay for them but your return on investment would be decreased, penalizing you for this poor allocation of resources.
- ajross 15y ago
  That's the libertarian answer, yes. But it doesn't work. In fact this kind of thing is routine in the corporate world. The randian solution here requires that there be a class of corporate executives willing to live comparatively impoverished lives. But they don't exist, because they're chosen by corporate boards populated by people who don't want to see their own perks vanish. And those boards are elected by, overwhelmingly, investment bankers living in the same world who view the inefficiency in their investments as minimal (remember they want to sit on boards some day too, and won't rock the boat). All of those people (the "1%" I guess) would need to simultaneously decide to take a pay cut to produce your hypothetically efficient executive compensation. It won't happen.
  - leot 15y ago
    That's strange, because whenever I propose wealth taxes to self-identified libertarians they complain about "double taxation" or somesuch. This is probably why my answer gets voted up by neither libertarians nor, uh, non-libertarians. The proposal I provided was given in the context of "Let's say I own a corporation ...". Not "Let's say I'm a manager of a large corporation". When the person owns the inefficient corporation, then wealth taxation seems like a viable approach. I think crappy management is a genuine problem at large companies, but I'm not sure that any kind of corporate taxation will fix it.
    - ajross 15y ago
      Then I misunderstood. I thought your earlier answer was sarcasm. A real libertarian could never accept a tax on wealth. All taxes are bad, but the only ones that are acceptable are taxes on economic activity. Taxing wealth is, in the randian sense, punishing success.

yummyfajitas 15y ago

As of 1986 (in the US), such things are taxed as compensation. Before 1986, most compensation to corporate executives was given out in such forms. In many other countries, executive wages are lower and the difference is made up with non-wage compensation such as what you describe. Incidentally, this change in tax law created the biggest spike ever in (measured) income inequality: http://www.scottwinship.com/1/post/2011/03/what-would-it-mean-for-theories-of-us-income-inequality-growth-if-the-us-experience-has-been-similar-to-that-everywhere-else.html http://www.scottwinship.com/1/post/2011/03/what-would-it-mea...

patio11 15y ago
This is very much in evidence if you know e.g. any Japanese CEOs. Our CEO (old day job) was bragging at a meeting one day about the $X00,000 car he drove, and then said "Remember, I work for a living, that's the company's car." It will continue being the company's car for the duration of his tenure with the company, and after he is CEO emeritus and on an advisor-to-the-board position he will naturally be given a new company car, and ... It also gets straight-line depreciated at, probably, 95 ~ 100% business use. (This is considered standard business practice here, in the same manner that an American businessman expensing a WSJ subscription would be totally-inconceivable-to-challenge standard business practice. When I bring in my income tax return in March I'm probably going to get chided again by the tax office for "forgetting" so many of my deductions.)

leot 15y ago

Well, then just Tax Wealth (and set cap gains rates to 0% while you're at it). If the limos and G5 jet that your company bought were inefficient assets, then as an owner of the company you would still have to pay for them but your return on investment would be decreased, penalizing you for this poor allocation of resources.

ajross 15y ago
That's the libertarian answer, yes. But it doesn't work. In fact this kind of thing is routine in the corporate world. The randian solution here requires that there be a class of corporate executives willing to live comparatively impoverished lives. But they don't exist, because they're chosen by corporate boards populated by people who don't want to see their own perks vanish. And those boards are elected by, overwhelmingly, investment bankers living in the same world who view the inefficiency in their investments as minimal (remember they want to sit on boards some day too, and won't rock the boat). All of those people (the "1%" I guess) would need to simultaneously decide to take a pay cut to produce your hypothetically efficient executive compensation. It won't happen.
- leot 15y ago
  That's strange, because whenever I propose wealth taxes to self-identified libertarians they complain about "double taxation" or somesuch. This is probably why my answer gets voted up by neither libertarians nor, uh, non-libertarians. The proposal I provided was given in the context of "Let's say I own a corporation ...". Not "Let's say I'm a manager of a large corporation". When the person owns the inefficient corporation, then wealth taxation seems like a viable approach. I think crappy management is a genuine problem at large companies, but I'm not sure that any kind of corporate taxation will fix it.
  - ajross 15y ago
    Then I misunderstood. I thought your earlier answer was sarcasm. A real libertarian could never accept a tax on wealth. All taxes are bad, but the only ones that are acceptable are taxes on economic activity. Taxing wealth is, in the randian sense, punishing success.