Conservatives Like to Protect the Top One Percent Conservatives argue that the use of high marginal income tax rates to again curb sky high CEO compensation would be a strong disincentive for them to be productive. That is not a proper economic analysis, although it works well ideologically for the right. The fact is high CEO compensation is largely unrelated to their marginal productivity. That is the central problem. They earn the big bucks whether their companies earn a profit or lose money. Marginal productivity has little to do with it. Secondly, with high taxes, they spend more time working and less time politicking for higher compensation because taxes take too much of any pay increment to make the politicking worthwhile. It is not worth hustling for the extra dollars. The alternative is work. A president of Coke Cola once told me he spent all day at the office dealing with the politics of senior management and ran Coke Cola from two legal sized brief cases at home at night. High income taxes would therefore encourage CEOs to work more, not less. Thirdly, what about those subordinate employees who are injured regarding their salaries in order to pay the excessive CEOs salaries -- what about their productivity and incentives? At any point, the money for higher CEO compensation has to come from somewhere. Getting paid below the value of your marginal productivity in both middle management and on the assembly line floor so CEOs can take home more income is a real and material disincentive for many more people who are arguably otherwise very productive and important.
Posted on: Fri, 25 Apr 2014 01:43:03 +0000
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