Saturday, November 2, 2013

Tax on Capital Gains and CEO Pay Ratios

It would be great if Congress would reform the tax code....but that is a pipe dream, because members of Congress benefit from the current tax code. My suggestions:

1) The marginal tax rates for regular wages are progressive, but it excludes capital gains. Tax capital gains over $1 million a year as regular income.

2) Also, raise the cap on Social Security to $1 million, and then tax capital gains for Social Security taxes as well.

3) Also, put a "flat tax" in place for corporate taxes (the current 35%, but WITHOUT any deductions/loopholes). CEO's stock-options are avoiding progressive marginal tax rates, and like a siphon, extracts corporate profits directly into the pockets of the execs --- especially when capital gains tax rates are lower than corporate tax rates.

4) Finally, impose a maximum 30:1 pay ratio on CEO/worker salaries. As the LA Times just reported, currently CEO-to-worker pay gap is obscene.

After years of delays, the SEC has just voted to enact a potentially game-changing provision of the Dodd-Frank Act on CEO compensation, and corporate America is fighting like mad to stop it.

The new provision requires corporations to disclose the amount their CEOs make compared to the salary of the median worker. Corporate actors are shocked because the rule is surprisingly strong -- it doesn't allow many of the usual gimmicks that corporations use to skew data. This new rule could set off a revolution at Walmart and other companies that are getting rich off of underpaid staff.

The US Chamber of Commerce and other big business organizations are frightened, and are fighting back, pressuring the SEC to change its mind during a sixty-day comment period going on now.

This data is valuable for investors, as it helps them determine which companies are dangerously overloaded at the top. The new disclosure will create downward pressure in the industry by rewarding companies with more reasonable salary hierarchies. It will also get workers talking, and put overpaid executives in the spotlight. This could be a game-changer for out-of-control inequality.

Unsurprisingly, corporate lobbyists are doing everything they can to stop these new rules, and if it looks like the public isn't paying attention, the SEC might just give in and water down its disclosure requirements. We can't let them get away with that. Let's flood the SEC with comments demanding the strongest possible rules for holding CEOs accountable to their investors and the public.

Congress won't reform the tax code because they benefit from the current tax code --- unfortunately, most members Congress are more like the voracious rich, not the magnanimous rich. But at least you can sign a petition to the SEC regarding the new provision that requires corporations to disclose the amount their CEOs make compared to the salary of the median worker.


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