February 3, 2014

Robert Reich Says We Should Set A ‘Maximum Wage’ For Top Executives

The minimum wage has not kept pace with inflation, this is a fact that not even Republicans attempt to refute, at least not that I’ve seen. But do you know what has far outpaced inflation? Executive pay. According to a Facebook post by former labor secretary Robert Reich, when minimum wage was first enacted in 1935 it was “intended to represent society’s sense of minimally decent pay.” Reich says at that time “executives were paid about 20 to 30 times the average wage.” But we all know what has happened over the decades.

Robert Reich – Why not a maximum wage for top corporate… — Since then, though, the minimum has declined relative to the average. And CEO pay has skyrocketed to more than 300 times the average. By almost any standard, this is indecent. The CEO of Oracle, for example, now gets 1,287 times the pay of the nation’s average worker. GE’s CEO gets 491 times the average worker’s pay. Company directors who set CEO pay explain they’re keeping up with the pay of “comparable” CEOs in other corporations, a process that has escalated the rewards.

Ah, but now we are talking about “punishing the rich” or “punishing success” or “waging a class war.” Well, there’s been a class war, and the rich won. So Reich proposes a new maximum wage enacted under the same intentions, to represent society’s sense of a decent maximum pay.

So why not set a maximum of, say, 100 times the average worker’s pay? Any corporation paying its CEO or any other executive in excess of 100 times the pay of the nation’s average worker that year would have to pay an “excessive executive pay” tax equaling ten times this overage — thereby eliciting the attention, and discipline, of shareholders. What do you think?

While I agree with this in principle, I think it plays too much into right-wing arguments, and it would stand no chance of ever passing congress (not that much of anything could pass this congress).

What I propose instead is a more progressive tax system, one with more brackets, and higher rates, at higher incomes. For example, a 45% rate up to $500-600,000, a 50% rate up to $700-800,000 and then a top rate of 55% on income above $1 million.

But that’s not enough, we also need to eliminate the games people play at the top, reclassifying income in ways that allows for the least amount of tax paid. So I also propose that all income above a certain level (say $1 million) is taxed as simple income. No capital gains nonsense.

While I agree with Reich’s sentiment and intent, I think using any kind of language or proposal in an attempt to set a maximum wage is antithetical to the way most people think. People want fairness, and people want our values represented in the form of economic opportunity, and the best way to do that is with a more progressive tax system.

Robert reich

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