Reed Hastings, head of Netflix, contributes an op-ed piece to today's Times entitled "Please Raise My Taxes." His premise, in essence, is that limiting executive salaries at companies receiving federal bailout funds, while satisfying the public's understandable thirst for vengeance, is ultimately self-defeating, in that it puts those companies at a competitive disadvantage at just the time when their competitive ability, indeed their ability to survive at all, is already severely compromised.
Much more effective, Hastings argues, would be to let companies pay whatever they want, but to tax high earners - his suggestion is anyone earning over a million dollars a year - at 50% rather than the current rate of 33%. The logic behind this is so impeccable that I'm annoyed it hadn't previously occurred to me. At a time when the economic system is so imperiled and millions of people are being put out of work, we obviously can't raise taxes on ordinary workers, let alone the unemployed, yet at the same time, the government is going to need vast amounts of new income to even begin to cover the massive deficits we are now rolling up.
We are entering a period where anyone who's still employed will be counting him or herself lucky; how much more so the executive who's pulling down a few million? Only the most churlish or greed-crazed could complain about having to scrape by on five million instead of ten at a time of national crisis like this one, and at the same time, the public would get the satisfaction that of any bailout money being used to pay executive bonuses or salaries, at least half would be coming straight back to the Treasury.
I had an uncle, now deceased, who, at least until I came along, was the only member of our family to have ever made any significant amount of money. When Reagan cut taxes for the well-to-do, he was outraged, and wrote to his Congressman: "I don't want a tax cut. I don't need a tax cut. I've got plenty of money. Take my taxes and use them to help people who aren't as well off as me."
He was ignored, of course, and the dire straits in which our country now finds itself are at least partially the result of the massive deficits run by ideologically-driven tax cutters (the same sort of Congressional screwballs, incidentally, are busily attempting to sabotage the economic stimulus program even as we speak). "Where are the dollar a year men?" more than one commentator has asked, referring to the many corporate executives, already fabulously rich, who volunteered to work for the government for that princely sum during a previous time of national crisis, namely the Second World War. It's clear now where the era of greed and personal irresponsibility has led us; it's time that those who have benefited disproportionately from the boom years show their gratitude and civic-mindedness by giving something back, and for that I salute Mr. Hastings and hope that others will follow his example.
4 comments:
These fools are only at a competitive advantage if you believe a competent bank exec can't be found for under $500k. Don't get me wrong, I'd love to see millionaires taxed more, but I've never heard of any convincing argument that 7 figure salaries are necessary to pull in top talent (I mean this is the same talent that caused the mess in the first place, right?), though to be fair, $500k probably goes less far in NYC.
it's not exactly related, but i always think it's weird when people demand lower taxes instead of demanding more for their taxes. i will happily pay higher taxes to have healthcare and good education and all that crap we only get half assed versions of. hell, the way i pay for health insurance now, it might as well be taxes. i mean, it's taken straight from my paycheck.
The competitive disadvantage would come from the fact that companies not receiving bailout funds would be free to continue paying multimillion dollar salaries and bonuses to their executives while those being bailed out (who arguably would be even more in need of topflight management) would be limited to 500K. A competent bank executive might indeed be willing to work for that salary, but why should he when he could walk across the street to a bank paying ten times more?
This problem could be avoided if you limited salaries for all corporations, but that would be of dubious constitionality and almost impossible to enforce. Sharply raising the marginal tax rate on million dollar-plus incomes would accomplish the same end without wholly removing incentives or introducing competitive disadvantages among companies.
The Oakland A's basically turned the world of baseball upside down by winning championships with its approach of dropping multi-million dollar superstar athletes in favor of undervalued fatsos. Of course the worlds of finance and major league baseball are quite different (and in fact I have about zero expertise in either), but I do not see why this same strategy could not be deployed in the banks.
The idea that the market value of a bank exec is somehow a natural law that cannot be broken seems like pure superstition. Find the undervalued fatsos who can't score an interview at the other firms. Show me evidence that these porkers cannot run a bank just as effectively as their A-rod multi-millionaire counterparts.
Well, maybe that's not fair to ask, since you are not a Wall St. pundit, Larry Livermore, but you do have experience in the music business. Do your experiences there really tell you that top management are worth every penny, and that equivalent or better performance can't be extracted from the minor leagues at much lower prices, simply because of competitive disadvantages?
I agree that no one worth their salt would work for poverty wages, but $500k is nothing to sneeze at.
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