Wednesday, August 31, 2011

The Pay's The Thing

From Politico:

One-fourth of the highest-paid CEOs in the United States made more money last year than their companies paid in taxes, according to a report on Wednesday.

For the 25 CEOs whose earnings exceeded their company’s federal income tax, pay averaged $16.7 million, a study by the left-leaning think tank the Institute for Policy Studies founds. The report also revealed that many of the firms spent far more on lobbying than on taxes.
The report revealed eBay paid CEO John Donahoe $12.4 million — but reported a $131 million refund on its 2010 federal income taxes. And at General Electric, where CEO Jeff Immelt raked in $15.2 million, the company received a $3.3 billion refund and dropped $41.8 million on lobbying and political campaigns. And at Boeing, CEO Jim McNerney takes home $13.8 million, while the company paid $13 million in taxes and spent $20.8 million on lobbying in 2010.
On average, S&P 500 CEOs make $10.8 million.

Taxes should not conficscate wealth, not should they favor one group over another. With that in mind, and the state of the labor market at present, it's reasonable to ask that the tax code be made more fair so that a few people don't have enormous wealth and a huge majority suffer or teeter on the brink of disaster.

Both Republicans and Democrats have passed legislation that favors the wealthy and treats certain types of income and gains more favorably than others. The carried interest rule for hedge fund operators, for example, treats their gains at the capital gains rate, 20%, as opposed to the income tax rate, which is in the high 30's.

So what to do? That question, more likely, will be answered from the grass roots of society on up rather than from the top down. And it could get ugly. If the economy enters another recession or the employment situation becomes even more dire, we could see social unrest. I hope not. But clearly, this is the crux of the problem and we will only solve it when the gap between wealthy and not-so-wealthy is narrowed. Congress could do it as part of the deficit reduction plan, but the Republicans will not raise revenue and the Democrats will not reform entitlements, so perhaps the automatic elements of the debt deal will do it for us.

I am cautiously hopeful that our elected officals will do the right thing, but contact them to give them a push.


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