Why do American CEOs get paid so much?

I believe that's true, except when the shareholders get ripped off.

 

I understand what you are saying as I am an investor. I did loads of research beforehand and I hope all shareholders research as well.

 

The economy worked well for most Americans during the 1950's. High taxes for rich people and corporations meant low taxes for working class Americans. One third of the work force belonged to labor unions. CEO's in Germany and Japan get paid much less than CEO's in the United States. Nevertheless corporations in Germany and Japan usually produce better consumer goods.

 

Fortunately, most Americans disagree with you. For years public opinion surveys have indicated support for a more progressive tax system.

 

Tax rates won't reduce income disparity.

That's never what it should be used for anyway.

 

I’ve always been in favor of a flat tax system. I don’t understand how everyone paying the sane proportion of their income is unfair.

I guess a government could tax 100 percent of the wealthiest people’s income but I think that might have “some” negative effect on investments. The highest tax rate was 91 percent in the US at one time.

At that point, I personally would choose to close up in the US and move my investments and or company overseas as it appears many corporations have chosen to do.

Who can properly blame them?

 

And more to the point, there is effectively no relationship -- some studies even find a negative relationship -- between CEO pay and corporate financial performance. Financial history is littered with the corpses of large, previously successful firms whose CEOs and other C-suite executives grabbed obscene quantities of shareholders' wealth immediately before their collapse. In fact, here's a prediction: given Elon Musk's obscene overpayment last year and Tesla's gravity-defying stock price, look for Tesla to crash by >80% in the next year or two. Tesla short sellers have been mauled by the market up to now, but that sort of thing is never sustainable for long. At some point, being short TSLA is going to be the stock play of the year.

 

Yes, flat tax rates are generally best because differential rates can always be gamed. But a flat rate of tax on what?

It's unfair because basing taxation on income is always inherently unfair. The two most fundamental and widely accepted principles of sound taxation policy are "ability to pay" and "beneficiary pay." Income is not a good measure of either of those.

Highly progressive rates of tax on extremely high incomes have little effect on the economy because extremely high incomes are almost never earned by any commensurate contribution to production. They are obtained by privilege and rent seeking.

American companies do not leave primarily to avoid taxes on their profits, which are not particularly onerous in the USA compared to other countries, but to reduce labor costs and avoid the burden of complex and often contradictory regulation.

 

Ok then. I will bite; how should taxes be distributed to be fair to everyone and still leave the wealthy with enough to invest in businesses that generate job growth. I mean now that shut downs have killed millions of jobs literally forever.

 

HIGHLY UNFAIR DISTRIBUTION OF INCOME

Blah-blah-blah.

We as a nation should tax very high salaries, and spend the funds on both educating-further our people (all post-secondary levels) for free; and instituting a national healthcare system that is far less costly than the present one that results in an age-span 4 years less than Europe!

The top-earners are raking in the moolah benefitting from ridiculously low income-tax rates. They should be taxed at far, far higher rates*. What is happening in America is extreme Income Disparity of which you are apparently ignorant - so see here: Income inequality

You will note that in the range of advanced economies (in the OECD) the most outstanding inequality of any developed country is Uncle Sam's.

And you likely need a definition of Income Disparity, so here's one:

You will note that this is an Economics Forum. The above should therefore have pertinence. You need to understand how nations like the US - where the income-disparity is too high - are amongst the least "fair and just" of any.

Otoh, you can remain with a highly significant proportion of Americans who think that "more is better" and so what if a tiny percentage of the nation owns one helluva lotta moulah (leaving a significant portion of the rest to languish).

Where, in fact, developed nations since WW2 have moved far, far beyond that arcane notion. Yes, socialism is rightfully dead. Earnings cannot be all the same, which simply instigates a lack of desire to improve. But, at the other end of the spectrum is "improvement" that betters only a privileged tiny percentage of the population:

Viewing the above with a sense of equitability one understands how UNFAIR is the United States in terms of the distribution of Income (which is derived from a common free-market in which we all participate). The rates have been rigged in the US to allow the greater proportion of income to a comparatively few wealthy.

Whereas in Europe, higher-taxation** provides the revenue to support both National Healthcare and Free Tertiary-Education. The key to it all is a nation getting its priorities right.

And Uncle Sam is not one of them ... !

*Our World in Data Income tax rate history graphic, here.
**As well as far, far lower expenditures on national armies.

 

CA has the highest taxes and also has the highest poverty.
In spite of record access to what you call "health care", Americans are sicker than ever.

Results speak for themselves.

 

Ok so let’s take 90 or 95 percent from the wealthy leaving that unavailable for investment. Let’s give that to the proletariat. Do you not think they will not spend it on cars and large screen TV’s? Do you truly think they will use it on any kind of investment? There will be a huge mini boost to consumer products but little value to long term growth. Review the fact that people who have won millions in the lottery generally spend it all within the first few years after receipt. The net effect of redistributed wealth will be much less than this of course.

 

Tiresome drivel.

Everytime a right-wing nutter wants to put an argument he does it exactly as you have ...

 

Then explain to me what is wrong with my economic argument. What are your warrants opposing it? Saying it is stupid is not helpful in the discourse.

 

Healthcare Rankings, here: Countries With the Most Well-Developed Public Health Care Systems

Q. E. D. ...

 

Here is the US, illness is the problem, not the lack of the product you call "health care" Health, both financial and physical, comes from personal responsibility, not the government.

 

Lotteries make about one one-thousandth of the millionaires in America. You've got your quote wrong.

What matters is the fact that upper-incomes have obtained a dominant part of America's wealth. Had there been more effective taxation, ie. had Reckless Ronnie's administration NOT BEEN ABLE TO REDUCE TAX LEVELS, then taxation would have given American governments the means to spend money on Healthcare and thus expand the typical life-span, which is four-years less than Europeans.

As shown here, the historical evolution of upper-income taxation in the US:



The first significant drop in upper-income taxes was performed by JFK just before he died. The second and third by Reckless Ronald Reagan.

Both have created the massive Income Disparity that rules America today. For a graphic view of Income Disparity by country, see here. Note that of the key economies the most Income Disparity is that of the US ...

 

Explain to me the tax structure that you see as fair in your own words and not some cut and paste article. I stand by a flat tax.

 

A Flat tax is for sales of goods/services. Income Tax has the most profound effect on human behaviour because it determines accumulated Wealth.

What we do with our wealth very largely affects the economy. Not the Flat-tax.

It has become wholly apparent that the US generates far too much Wealth that goes to far too few people. Anyone who thinks that such is "just fine" has no sense whatsoever as regards societal-fairness and how to assure it should dominate political decisions and their outcomes.

Any country that has 39% of its population living below the Poverty Threshold has got their economic system all wrong, wrong, wrong. And if you live in America then you are both part of the problem and the solution. Wakey, wakey.

The underlying problem is that Americans just don't give a damn about poverty. They think its "somebody else's job to fix-it". Which is why the problem is never solved.

And why America's prisons are bursting at the seams*. Get people educated and they will find decent jobs rather than revert to crime ...

*See here: Incarceration rates in OECD countries as of May 2020 - excerpt:

 

Moving right along ...

 

Totally evading my question about what tax structure would be acceptable to you in solving income disparity.

Just an attack on the wealthy who invest in the economy and job creation.

Where else will job creation come from??

 

Nope I will not allow “moving right along”.
You are kvetching about what’s wrong without even trying to present practical solutions.
You have none so you feel complaining is sufficient.
It is not!!

 

Before anything else is taxed, the entire value of government-issued and enforced privileges (land titles, bank licenses, IP monopolies, broadcast spectrum allocations, oil and mineral rights, etc.) should be repaid to the government that creates it. There is no reason private interests should be legally entitled to pocket value they did not create. Land and other natural resources are best taxed by junior governments because they can't move, the rest by the national government. National governments could also naturally be funded by seigniorage from issuance of money, and by Pigovian taxes that people would try to avoid by jurisdiction-shopping if they were levied by junior governments. That might not be enough to pay for our current levels of government spending, but a lot of current government spending consists of futile attempts to repair the social and economic damage caused by unjust and economically harmful taxation. In the USA, military spending is also absurdly excessive.

 

Think about what you are saying. When consumers spend money, who gets the money? Producers! Who is better able to invest that money productively than the productive people who earned it? The notion that people have to be prevented from spending their money in order to accumulate savings for investment is bollocks. All that does is cut parasitic bankers in on the action. Far better to just let people spend the money on consumption, ensuring it all goes to producers, and can then be invested by them. And FTR, that is why I oppose taxation of corporate profits as well as personal income.

Actually, only about 1/3 do. The rest become permanently wealthy. The same applies to entertainers, professional athletes, etc. who make a lot of money suddenly, without really understanding how to use and benefit from it. It is quite remarkable that the amount does not appear to matter: such people will go through $300M almost as fast as they go through $3M. The great majority of lottery winners do say, however, that their lives got worse after they won because most of their relationships with friends and family were destroyed.

As long as the system of upward redistribution of wealth remains intact.

 

Like many progressives, LB is married to income tax, and cannot even conceive of a system of public finance that is not based on it.

The wealthy don't invest their money in the economy and job creation. They couldn't care less about it. They just bid up the prices of each other's rent collection privileges because it doesn't require any productive contribution. If you want productive investment, make sure it's the productive who are getting the money, not the wealthy.