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Should the Buffett Rule" be made law?

Should the Buffett Rule" be made law?


  • Total voters
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I was about to say that too. America has the 2nd highest effective corporate tax rate in the world, only behind Japan. To say that they're not pulling weight is ludicrous.

Also, I know many people are concerned with a growing wealth (and even income) stratification here in the United States. Although I think this is a perfectly valid concern, I don’t believe we are going to change the fact that CEOs make an average of $300+ dollars to every $1 dollar their average employee makes (vs. in the 1960’s when the ratio was at about $25 to $1) with the tax code.

It’s like a political ‘band-aid’ fix that usually will end up reducing gov't revenue in the long-run.

But as for why the CEO salary ratio has grown so rapidly in the past 50 years is beyond me. As I stated in an earlier thread, I don’t think the CEOs of the 1960’s were any less bright, productive, valuable than they are today, so what else can explain the explosionary growth of the ratio?
 
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Any chance you could point me to a specific page instead of doing the "lawyer thing" and burying me in paper while expecting me to find what you're looking for?
 
I was about to say that too. America has the 2nd highest effective corporate tax rate in the world, only behind Japan. To say that they're not pulling weight is ludicrous.


US Corp tax burden high? No, says Bruce Bartlett:


May 31, 2011, 6:00 AM
Are Taxes in the U.S. High or Low?
By BRUCE BARTLETT


(snip ... )

Yet if one listens to Republicans, one would think that taxes have never been higher, that an excessive tax burden is the most important constraint holding back economic growth and that a big tax cut is exactly what the economy needs to get growing again.

Just last week, House Republicans released a new plan to reduce unemployment. Its principal provision would reduce the top statutory income tax rate on businesses and individuals to 25 percent from 35 percent. No evidence was offered for the Republican argument that cutting taxes for the well-to-do and big corporations would reduce unemployment; it was simply asserted as self-evident.

One would not know from the Republican document that corporate taxes are expected to raise just 1.3 percent of G.D.P. in revenue this year, about a third of what it was in the 1950s.

The G.O.P. says global competitiveness requires the United States to reduce its corporate tax rate. But the United States actually has the lowest corporate tax burden of any of the member nations of the Organization for Economic Cooperation and Development.

31economist-bartlett2-blog480.jpg


more: Bruce Bartlett: Are Taxes in the U.S. High or Low? - NYTimes.com
 
Any chance you could point me to a specific page instead of doing the "lawyer thing" and burying me in paper while expecting me to find what you're looking for?


It has a table of contents. Not hard to check it out.
 
Also, I know many people are concerned with a growing wealth (and even income) stratification here in the United States. Although I think this is a perfectly valid concern, I don’t believe we are going to change the fact that CEOs make an average of $300+ dollars to every $1 dollar their average employee makes (vs. in the 1960’s when the ratio was at about $25 to $1) with the tax code.

It’s like a political ‘band-aid’ fix that usually will end up reducing gov't revenue in the long-run.

But as for why the CEO salary ratio has grown so rapidly in the past 50 years is beyond me. As I stated in an earlier thread, I don’t think the CEOs of the 1960’s were any less bright, productive, valuable than they are today, so what else can explain the explosionary growth of the ratio?


That's a good question. I don't know the answer. American CEOs get paid much more than their overseas counterparts. Maybe it's something in the corporate governance charters? I really don't know.
 
As a percentage of GDP? Yeah, I guess we ignore the fact that America has four times the gross product of the 2nd wealthiest nation in the world.

Argument fail.
 
As a percentage of GDP? Yeah, I guess we ignore the fact that America has four times the gross product of the 2nd wealthiest nation in the world.

Argument fail.


Understanding math fail.


Also, just looking at the US, Mr. Barlett points out that the rate will be 1/3 of what it was in the 1950s.
 
Any chance you could point me to a specific page instead of doing the "lawyer thing" and burying me in paper while expecting me to find what you're looking for?

not really. i am reading it right now. pretty interesting, and of course you know that effective and statutory rates are not the same. read the summary.
 
That's a good question. I don't know the answer. American CEOs get paid much more than their overseas counterparts. Maybe it's something in the corporate governance charters? I really don't know.

it's because they can. corporate boards vote on salaries, and corporate boards are made up of ceos from other companies. they scratch each other's backs.
 
That's a good question. I don't know the answer. American CEOs get paid much more than their overseas counterparts. Maybe it's something in the corporate governance charters? I really don't know.

Me neither, though I have a few ideas as to why this is occurring. Perhaps the CEOs got smarter at some point and realized that they are usually about 300x more productive vs. the average employee as opposed to maybe only 25x more productive.

The 1960's CEOs were probably just being too modest.
 
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They get paid more because their salaries are based on options, which can easily allow for very high returns based on the market value of stock at any given point of call.
 
They get paid more because their salaries are based on options, which can easily allow for very high returns based on the market value of stock at any given point of call.

they also make hella good salaries.
 
they also make hella good salaries.

Yea, but Gipper makes a good point. I don’t think it’s uncommon to see a CEO to making only 1/15th of his/her yearly income in salary. Most of the time when you take a look of the size the company they’re managing, the salary portion isn’t all that unreasonable.

It's those gifts and stocks and goodies which pile up into the $300+ to $1 ratio.

In another way of looking at it, CEOs are seeing a bigger share of company profits than their counterparts in the 1960’s.
 
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That's a good question. I don't know the answer. American CEOs get paid much more than their overseas counterparts. Maybe it's something in the corporate governance charters? I really don't know.

I think this needs confirmation, but I think one reason why corporate pay is lower overseas is because many overseas corporations have profit-sharing programs that allow their employees to become shareholders. So while the CEOs manage a business the CEOs are still accountable to their employees as shareholders, and employees as shareholders have a say in the elections of the business' Board of Directors.

So this lends a kind of balance of power between Labor and Management: Management makes and direct policies that Labor must act on but Labor has a say in who is becomes a part of Management.

I should note that allowing employees to be shareholders also has the potential for a balance of power between Labor and Management that doesn't make unions necessary to attain it.
 
David's a little more patient than I am. I was summarizing. :D

liblady said:
they also make hella good salaries.

Because options incentivize officers to have vested interest in the company above and beyond normal expectations.

Only thing I wish they'd change is if they exercise a call at a time when market prices are artificially inflated, they are penalized based on...I dunno, something more along an average market yield.
 
David's a little more patient than I am. I was summarizing. :D



Because options incentivize officers to have vested interest in the company above and beyond normal expectations.

Only thing I wish they'd change is if they exercise a call at a time when market prices are artificially inflated, they are penalized based on...I dunno, something more along an average market yield.

the options i was granted over the years (a lot) are worthless. our ceo received bonuses instead of options for selling our company down the river. of course, all the significant employees received HUGE bonuses........while others saw their bonuses disappear. **** ceos.
 
Because options incentivize officers to have vested interest in the company above and beyond normal expectations.

That's not necessarily true.

Options don't necessarily incentivize CEOs to have a vested interest in the company.

Rather, options incentivize CEOs to have a vested interest in the company's worth in stocks.

These are two separate things. They are separate because a CEO could perform actions that increase the worth of their company's stock but also hinders a company's long-term performance. For example, the first thing many incoming CEOs do to reform a corporation is to lay off employees. This makes the price of the corporation's stock rise as the corporation no longer has to pay those employee wages. But (depending on many factors) this may not be the healthiest thing for a corporation to do.

Basically, my argument is that CEOs are just as likely to pursue short-term gains that cause long-term losses for the business than perform actions he feels are for the best benefit of the business.
 
Flat tax for all that make twice the Poverty level with no deductions, with a similar flat tax on business above a certain level and no deductions.

Nothing would lead to a a two class system faster than a flat tax. What would be the point for the poor to work to become middle class since a flat tax places the greatest burden on them to put out the highest proportion of their discretionary income?
 
samsmart said:
That's not necessarily true.

Options don't necessarily incentivize CEOs to have a vested interest in the company.

Rather, options incentivize CEOs to have a vested interest in the company's worth in stocks.

These are two separate things. They are separate because a CEO could perform actions that increase the worth of their company's stock but also hinders a company's long-term performance. For example, the first thing many incoming CEOs do to reform a corporation is to lay off employees. This makes the price of the corporation's stock rise as the corporation no longer has to pay those employee wages. But (depending on many factors) this may not be the healthiest thing for a corporation to do.

Basically, my argument is that CEOs are just as likely to pursue short-term gains that cause long-term losses for the business than perform actions he feels are for the best benefit of the business.

I know you're right and that's why I added my caveat as a "how it should be" thing. I know that CEOs try to hike up stock prices temporarily to allow themselves to look better and to profit. That was why I wanted some sort of penalty were they to do this artificially for the purpose to call an option and make a bulk of money that should not be allowed.
 
Only thing I wish they'd change is if they exercise a call at a time when market prices are artificially inflated, they are penalized based on...I dunno, something more along an average market yield.

Agree.

Unfortunately under this setup (CEOs make a bulk of their salary from company profits), wealth will end up stratifying.

When only the top tier of employees reap all of the company profit year after year, while the average worker salaries are treated more like commodities (and do not expand/contract based on company performance), all of the ‘gains’ from everybody’s hard work essentially goes into the pocket of just one small portion of the population. Again, give this enough time and you end up with a society where the bulk of a nation’s wealth is controlled by just a very small % of the population.

Does anyone agree?
 
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I know you're right and that's why I added my caveat as a "how it should be" thing. I know that CEOs try to hike up stock prices temporarily to allow themselves to look better and to profit. That was why I wanted some sort of penalty were they to do this artificially for the purpose to call an option and make a bulk of money that should not be allowed.

The only problem with penalizing this the way you suggest is that it's awfully difficult to prove that that's what a CEO is doing.

After all, employee layoffs may be a legitimate means to reform a business to make it more viable.

Instead, I think a better thing would be to do what I mentioned before - make employees have more of a stake in the stock of a company by making employees shareholders. After all, while CEOs execute corporate policies the CEOs are chosen by shareholders. So by having the employees choose the CEOs there may be more equilibrium between Labor and Management for a business. Also, CEOs will be more beholden to the employees and will take steps to take care of them and their working conditions.
 
samsmart said:
The only problem with penalizing this the way you suggest is that it's awfully difficult to prove that that's what a CEO is doing.

After all, employee layoffs may be a legitimate means to reform a business to make it more viable.

Instead, I think a better thing would be to do what I mentioned before - make employees have more of a stake in the stock of a company by making employees shareholders. After all, while CEOs execute corporate policies the CEOs are chosen by shareholders. So by having the employees choose the CEOs there may be more equilibrium between Labor and Management for a business. Also, CEOs will be more beholden to the employees and will take steps to take care of them and their working conditions.

Maybe it's because of my profession and background, but I could figure out, with an acceptable degree of error, whether a CEOs action is due to vocational prudence or because he's looking to bump his own bottom line. Wouldn't hurt if I had a few people with me to run leg work and decipher a few things (after all, major corporations have massive accounting staffs for a reason), but I like to think I have enough skill with reports, sheets, and forecasts to figure out which is at least moderately necessary.
 
That's not necessarily true.

Options don't necessarily incentivize CEOs to have a vested interest in the company.

Rather, options incentivize CEOs to have a vested interest in the company's worth in stocks.

These are two separate things. They are separate because a CEO could perform actions that increase the worth of their company's stock but also hinders a company's long-term performance. For example, the first thing many incoming CEOs do to reform a corporation is to lay off employees. This makes the price of the corporation's stock rise as the corporation no longer has to pay those employee wages. But (depending on many factors) this may not be the healthiest thing for a corporation to do.

Basically, my argument is that CEOs are just as likely to pursue short-term gains that cause long-term losses for the business than perform actions he feels are for the best benefit of the business.


Great post sam and right on target....when CEO pays became tied to stock value is when all the shenanigans began, whether or not the stock gain was sustainable or had any relation to the companies long term health didnt matter, CEOs got paid and recieved bonus'
 
As I can only vote for the Buffet Rule - I will cast a YES vote. In reality the Buffet Rule should take into consideration the progressive income tax and the rate for millionaires should NOT be the same as others but at least twice as much and that includes getting rid of the Rich Mans Income Protection Exemption otherwise know as the long term capital gains tax..
 
MusicAdventurer: We've gone over this in other threads .. the answer to the question is applying the definition of the word fair in order to determine what a "fair share" is.

Fair? Well, fair would be that we all pay income taxes at the same in amount. I pay $7,000 and the poor pay $7,000 and the rich pay $7,000. Yes, that is fair.

Fair? Well, fair would be that we all pay income taxes at the same percent. I pay 20% and the poor pay 20% and the rich pay 20%. Yes, that is fair.

Fair? Top 1% pays 40% and bottom 47% pay 0% for income taxes. Nope. That is not fair.
 
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