Jim, you raise an issue I’ve written on. I’ve suggested three fundamental fixes:
- Capping the ratio of taxable corporate profits to deductible costs at a ratio of 25% and applying an excess profits tax to any profits above that level. This would remove much of the incentive for higher prices, lower wages and bad behavior because the corp wouldn’t be able to keep the extra money grained from that behavior. BTW, Google and Apple’s ratios are at or below 25% so this is certainly not a disincentive to making money.
- Removing tax deductions for executive compensation above 20X the median household income (about $1.2M) and doubling the deduction for wages paid below 2X the median household income (about $118K) to raise worker income and reduce executive income, thus reducing the gap between pay to the highest and lowest paid employees.
- Requiring the approval of a majority of all shares, not just voting shares, for all executive compensation payments, including options and bonuses, in excess of 20X median household income/year. If we get rid of the executive incentives to drive up the short-term stock price we remove much of the motivation for corporate excesses.
If progressives would put as much energy into these sorts of fixes as they do into some other causes I think we could accomplish a sea-change improvement in our economy and the working and middle classes.
— David Grace