What about a "maximum wage"?

Anything an individual earns about a certain high amount, say $5 million per year, is taxed at a rate of 100%.

This would help close the gap between the very richest and the very poorest, while still giving people an incentive to earn money and benefit the economy.

Because it is their money, they have earned it.
Say I start a buisness and make well above your maximum wage. By what right can you even consider taking that money away from me? It is not yours, it is not going to pay for government services I voted for, it is not stolen, the wealth did not even exist before I created it.

It is my money. I don’t care how much it may close any gap, it does not belong to anyone else but me and you cannot have it without my giving it to you.

Taxed at a rate of 100%? Wouldn’t that mean that someone whose earnings exceeded the “maximum wage” would have to return all of his earnings to the government? How is that fair, or even feasible?

That’s called communism. Maybe not in the strictest sense but it’s basically the same philosophy. IMNSHO enough people in the US have started with nothing and became independantly wealthy that you can’t blame your lack of wealth on “the man.” There’s no need for communism.

How about the market being allowed to set salaries? - you know, kind of like how I didn’t get a raise this year because my salary was a fair bit higher than others in the same field and they wanted to keep things in line. Works for me. I know my worth and don’t expect a penny more (although it’d be nice).

Well aside from philosophical issues your proposal means that people at the maximum wage face a marginal tax rate of 100% which means they have absolutely no economic incentive to earn more money.

Without discounting the role of cronyism, nepotism etc. it’s a fact that many of the people who earn more than 5 million are talented,hardworking individuals in positions of responsibility in the business world and I am not sure that eliminating their incentives to work hard does the rest of us much good.

That’s not to say that reducing inequality is not a good thing but it can be done by much more modest proposals (reversing Bush’s massive tax cuts for the top 1% would be a start) which don’t damage the economy.

Why is it that when someone wants to “reduce the wage inequalities” they always do it by tearing down and destroying others rather then lifting folks up?

Because that takes money.

This is only true in capitalist fantasies. In reality, people at the top do not earn the marginal amounts that they recieve.

While I would not favor a marginal rate of 100%, I think a marginal rate of 70% on the top income earners, as the U.S. had before Reagan threw a party for the rich, would be a good start. Then we could work on eliminating the fiction of corporate personhood, and increasing economic democracy.

The OP also remind me of an old Carl Barks Scrooge McDuck cartoon.

McDuck is about to make a sale and make several million dollars. But then he realizes that if he makes any more money, he’ll be in a higher tax bracket making the net result of the sale a loss. So he tried to ditch the sale and also give each of his nephews a ton of money each to be sure he stays under the limit.

Now, assuming the excess earnings in the OP are earmarked for something, the supposed recipient basically be screwed, because who wants to make money they’re never gonna see? Plus, production in major outfits would slow down… chain reaction, all that stuff.

Sorry, but justify this statement please. If I start a company, turn it into a profitable concern, and then resell it for many millions who else has earned that money but me?

It would be certain to produce some weird consequences. Probably better to try 70% and see how that works.

It’s been pretty much tried in the UK actually. In the 1970s the top rate of income tax was, at one point, at 99%.

Result: the wealthy all left the country and domiciled elsewhere.

If you’re rich enough to be earning more than $5m per year then you can pretty much base yourself anywhere from a tax perspective. And you’ve just given them huge incentive to leave.

Not to mention that at that level there are always ways to move that income around to avoid such a thing.

Surprisingly, I have a certain level of sympathy for the philosophy (though 100% seems rather extreme). In principle you could impose a supertax on income that is not invested in further wealth-creation (though the amount of worms that can holds is not pretty in and of itself) and I would to some level support the concept. But the practical issues that no country is an island - not even an island - makes it impossible in reality.

pan

The word “earn” is somewhat politically loaded, and confusion arises in arguments such as these due to some taking its meaning as being closer to “deserve” and some to simply “receive”. Hence the Indian factory worker “earns” less than a dollar a day while Jean Pierre Chretien “earns” in excess of 7 million per year (and further suggests that this amount leaves him “unmotivated”).

For all of the reasons above, 100% does indeed seem too extreme since “** progress **” appears to require a ** reward ** (or is, at least, speeded up by such. Also, whether one counts making a fortune merely by filling the top position in a company or luckily manipulating the stockmarket as “progress” or not is questionable).

The only way I think a supertax will ever come into effect is by convincing a majority of the ultra-rich that their wealth is not morally justifiable. After all, as ** kabbes ** points out, if you try and force them to play nice they just take the ball home. Or to Belize.

Sorry, I said Chretien - isn’t he the Canadian PM or something? I was thinking of the CEO of GlaxoSmithKlineLemsipLucozadeGodKnowsWhatElse, who is quoted as feeling “unmotivated” by his vast salary.

Further apologies, Jean Pierre Gaultier is the name and, since I can’t find the quote anywhere, I guess I should retract the “unmotivated” comment (although I’m sure it was mentioned at the time).

Tax in many countries is set in bands - say, the first 10,000 is free, the next 20,000 is taxed at 20%, the next 30,000 at 40%, etc. IIRC, the UK 99% example was 99% of your first annual million, or something.

Still doesn’t make it right.

Sorry, to clarify, my final sentence should read “99% of everything you earned after your first million”.

I am rather fond of the notion that has been batted around in some circles of making salaries in excess of $1 million (or other comparable figures) nondeductible as expenses on the paying employer’s tax return. A company can still offer $80 million of compensation, but if it does so it’ll pay income taxes on $79 million of the profits that go toward paying that salary. This isn’t nearly as powerful a disincentive as placing an extremely high tax rate at the highest bracket, but nonetheless creates significant pressure at the upper end to contain salaries.

I’m not really in favor of this either, but I’ll play Devil’s Advocate and suggest an alternate way that such a program could be founded:

Rather than a strict money limit, say that the highest paid person in the company can’t be paid more than X times the wage of the lowest paid person, adjusting of course for geography (i.e., the CEO of Nike gets compared with the janitors in America, not the people in Indonesia that actually make the shoes.) X could probably be something like 150 - 300 times; it’s a tough sell to me that the CEO does 300 times the work of the other people in the company. And rather than discouraging the higher paid people from making more money, this is an incentive to raise everybody’s boat.

(I don’t think this would work either, but I think it’s perhaps a better effort than just raising taxes on some “maximum” income.)