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I screwed up on this. I just realized a left out the word "not". It should have read I do not believe increased taxes is the answer. Gosh there is no defense against stupidity on my part.
As a moderate, I usually consider Krugman to be a loon. However, I always try to see if he or others that I disagree with have any valid points. Here, he discusses how in the 50s and 60s those at the top had a more modest lifestyle due to (Taxes?) or a different world view on the part of corporate America. I have to say that I agree to a large degree with him on the excess wealth and lavish lifestyle of the managers of the companies. No CEO deserves compensation in the hundreds of million a year range. I do not believe increased taxes is the answer to this unfounded greed. I do not have an answer other than stockholders somehow gaining enough control to limit this. Those make millions by rishing their capital- that is not what I am talking about, It is the Jeff Immelts with $21,000,000 a year who basically lose money for their company that I object to.
Note that Richard Kender shows at $60,000,000. His salary is $1.00 a year but it shows the profit he made off the increase in his holdings in KMI and KMP both of which I own.
This post has been edited 3 times, most recently by JFrankWebb 17 months ago
275-0 scoring margin
Dana X Bible's National Championship team
I found it interesting that Warren Buffett gets paid almost near the bottom.
While we are at it, we should probably curtail the lavish salaries of actors, pop stars and athletes, whose income also gets way out of hand due to an out of sync supply and demand curve based on supply of one (that person).
LOL. Why? Dude is worth north of $50 billion and rakes in 10's of millions in dividend income. He doesn't need a salary.
I strongly disagree with putting caps on how much money a person can make.
The arguments made about tax rates in the 50's and American prosperity are as asinine as the those made about the Clinton tax rates and the boom we enjoyed in the 90's. Small minded people argue that America prospered under that structure as though the taxes were occurring in a vacuum. In reality the economy was riding the tech bubble. Likewise, American factories and corporations of the 50's were still enjoying the benefits of being the only game in town as Europe was still recovering from the devastation of WWII while dealing with the Cold War and Iron Curtain, and the Asian economies and production were virtually nonexistent compared to what we know today.
Taxation does not lead to prosperity. Get that through your skulls. There is no point in history that you can point to economic growth and high taxation running hand in hand without some overwhelming circumstances intervening in the normal course of things. This isn't the 50's and this certainly isnt the 90's. We are a consumer nation that doesn't build and export things in any semblance of what once was. If you want this country's economy to take off you have to get the government out of the way, get the government's and union's hands out of corporate pockets, and set up a long term regulatory and tax structure that provides surety and predictability in the markets.
This isn't hard. People who try to muddy the water, make half arguments, and pit one income class against another have no one's interest but their own in mind. If you vote for those who promise to solve inequalities by taking from one group and giving to another, or who seek to manage every possible outcome, success and failure via government intervention then you are part of the problem.
Go to your local PNZ meeting sometime to get a first hand look at what a remarkable failure trying to control the actions of people and companies can be through minutiae and punitive fees. And then apply that on the Federal level.
This post has been edited 2 times, most recently by Bobby_Batronic 17 months ago
I got brains. I got big ol' brains. I got dinosaur brains.
Krugman is truly a lunatic; and was a complete disaster when he ventured outside of academia and became a major advisor to Enron.
Simply look at the tax rates of 1955. The 50% bracket started at $36,000. $100,000 was 75%. $350,000 was 90%. How does that float your boat. Yes, I do have issues if the amount of money that the elite are being paid; whether it is running companies; acting, playing basketball or baseball or writing books and making speeches after they are president.
But here is a reality, You can't fix that with the tax code without damaging the economy. CEO pay isn't a tax problem; its a corporate issue with what stock holders are will to pay their CEO and the unfortunate reality is that great CEO's running $100 billion companies make their stock holders enough money to earn their $20 million dollar salaries. Look at Bill Gates. He didn't get rich on salary; he became rich because he created an completely new market that helped drive the information economy that helped increase our GDP by trillions during the 1980-1999 period. Warren Buffett didn't pay taxes because he never took a salary and lived nominally off a small fraction of his accrued capital gains. Changing the income tax rate would never have affected with of them. Society can attack their wealth to a degree by changing the capital gains rates, but that will cut investment in the economy and almost certainly hurt the economy in the long run.
The fact is that the upper 2% pay a higher percentage of income taxes in the history of the country. Lower taxes raise more revenues, even though its counter intituitive. In the 1960's after Kennedy cut tax rates from 91% to
The truth is that most of the jobs in this country are created by small businesses who make over $250,000, but less than $five million. Any attack at this income level will hurt job growth. People who make over $ five million with brains and a decent tax lawyer will simply find ways to escape taxes; just as they did in 1955. There is a reason that taxes as a percent of GDP was 17%, while before the recession in 2007 it had risen to over 20%. AFter Kennedy cut the tax rate from 91% to 70 in 1961, GDP grew by 42% over the next seven years, while tax revenue grew by 65%. Same thing occurred in the 1980's and again during 2000's after Bush's tax cuts before the recession hit.
Increased taxes have a populist appeal, but they are bad fiscal policy. Don't raise rates, but deductions and make more revenue taxable. Everyone has to know that Buffett and Gates have set up trusts so their billions will never be taxed, but as Joe Kennedy did with his estate.
The problem with the middle class has nothing to do with the upper class. The world economy has changed, its thats simple. In 1945, if you were an American who survived the war; you came home to the only functioning economy in the world . From 1850-1960, the U.S. probably had 70-80% of the world's economic output. Europe and Japan had been destroyed by WWII and hadn't rebuilt yet. A high school education could get you a good middle age income with benefits on an auto belt-line or in a steel mill. The U.S. was producing almost all of the world;s intellecual properties. CEO's weren't that important. They had tremendous price elasticicity with no cheap over-seas competitions. Unions could easily exhort them and drive up industrial wages. What started happening during the 1960's. T
The world economy started to grow and it grew with more modern production lines and much lower labor rates. America started to outgrow its domestic power production; especially oil and became dependent on foriegn sources. By the late 1970's and early 1980's, foriegn competion was beginning to cut into profits of the huge American industrial companies and we started seeing bankrupcties; first in steel, the in the auto industry. At that point; middle American industrial workers had become grossly overpaid in the world economy; while CEO's became infinitely more important in guiding their companies in the world economy. Wall Street became more important as the flow of money became world wide; and very smart people who could capitalize on that flow, even if only taking 1 or 2% of the flow rose to the top of the financial pyramid. Then the micro-chip and information came about and we created the internet billionaires we we see today.
This isn't because of the tax code. The economic world has structurally changed. If you are going to attack wealth, you can't do it through modification of the income tax code, at least not below $500k or million. That simply hits small business owners, physicians and attorneys who simply won't work as hard and net you will gain very little. Over a million, perhaps government makes some money on rich entertainers and athletes and a few executives. The reality though is that the great wealth from business and Wall Street comes outside the income tax code; but instead from stock options and capital gains. Much of Wall Streets money is taxes at long term capital gain rates whether they originally had their money invested or not. The Bush tax cut gave Gates a massive tax break. Gates could take the massive amount of money held by Microsoft and pay it out as dividend and he only paid 15%. Did he complain about that. Has Buffett ever said a word that every penny he's ever earned was cashing in stock bonuses at long term capital gains rates. Raising income tax rates doesn't attack the rich; it attacks the incredibly productive upper middle class.
Example. Say I was the Facebook guy and wanted to have $500,000 of disposal yearly income. I would cash in $10 million of my stock options next year and put it into a whole life insurance policy. I'd pay $1.5 mil. in taxes. The I'd use the $8.5 million to buy a whole life insurance policy and let it sit for six year. Then I would have almost $700,000 yearly in tax free income yearly without ever touching any of my Facebook stock until I was ready to do the same thing. Its absolutely stupid.
I realized that I mistyped and did not catch it. I corrected my mistake. I do not believe that higher tax rates are the answer. I do believe there is a need for reform of corporate America on over rewarding non performing managers. Gordoson has made the points I should have made and made them well. I am all for some some like Rickard Kinder or Dan Duncan making money off the appreciated value of his company. I have the bulk of my investments in their two MLPs. I am opposed to a CEO receiving a $25,000,000 buy out for running HP in the ground. I will link to an interesting power point that discusses economics in a historical perspective.
It is number 28 under AP European History "From Mercantilism to Adam Smith"
One major point of discussion to me is "free Trade" and how it has hurt middle class manufacturing America while helping many other aspects of our economy.
This post was edited by JFrankWebb 17 months ago
ding ding ding. one of the biggest lies out there is the policies of the presidency brought the country out of the great depression when in reality it was the war and rebuilding efforts following the war that put people to work.
I prefer a tax policy built around job types.
Entertainment industry, sports included- 65%
Teachers - 5%
Interesting article on coaches pay.
Frank, I agree with you that CEO has become out of line in many cases and without question needs to be directly linked to company profit and stock performance. It needs to be tied to long term perform, more than short term. I would pay my CEO a reasonable wage; then give large stock options dated five years in the future than can be purchased at today's stock price and sold at the future stock price. If the company does well, the CEO does well. If the company's performance sucks, then so do his re-imbursement package.
The problem is that CEO's virtually hand pick the company board which then become puppets.
True, the model that worked well for Spaw Glass, a contracting firm I worked with, was modest salary and two bonuses a year. Each department head was given a rather high percent of the profits they generated and told to divide them up with the troops. If you did not make a profit you still ate fairly well but no lavish bonus. In today's terms it went something like this. manager- salary $60,000 grand and good benefits. Bonus usually in the $200,000 range up to $500,000. Remember two a year. The two principals usually were at the million mark on a good year and 150,000 during the bad times.
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