Mort Mather Author Writer Organic Farmer Philosopher Thinker Restauranteur

How to improve your life and save the world.

Tuesday, October 20, 2009

Wall Street Bonuses

“What to do about those gross Wall Street bonuses?” politicians, “experts” and pundits bewail. They debate how best to regulate such things. Please. The answer is simple. Bring back the 91% income tax bracket.

Those of us who remember the 50s do so with fondness. It wasn’t all “Life with Father”, “Leave it to Beaver” and “Ozzy and Harriet” but it was a time when most mothers concentrated on the most important jobs like raising a family and managing a household. She was able to do that because one income supported the American Dream. Why did employers pay better then? One answer might be that there was little incentive to make gobs of money as the highest tax bracket was 91%. In 1954 income below $75,000 (today’s dollars) was taxed at 20%. Someone earning $1 million (today’s dollars) was in the 62% tax bracket. Anyone earning over $7.5 million paid 91% of every dollar over that amount in taxes.

Consider the fights between millionaire sports stars and millionaire sports team owners over multimillion dollar contracts. They are fighting over figures because in actual money it is too much for any individual to spend reasonably. I would put a cap on individual income. If you make over $2 million a year, you have to either give it away or give it to the IRS. Now the choice is either to make less than $2 million or to give it away which is a good motive, rather than greed, for making money. The sports stars will be easier to negotiate with. The team owners will either be generous to charities or, more likely, they will pay their employees more and charge less for tickets.

The 1954 tax brackets were essentially the same from 1951 through 1963. Want to guess what years the highest tax bracket was lowest? Other than the first three years of income tax in the US the lowest high tax bracket was 24%. Come on, guess the year. It was the year when greed ran amok. That it! 1929! The rate was 25% for the four years leading up to the Great Depression.

One more question in this quiz. When was the second lowest? It was, thanks to President Reagan, 1988-90 and has remained low ushering in the Great Recession.

I’m not talking about wealth redistribution. I’m talking about people making more money than they know what to do with and in the process bringing down a society that would be much better off if families could pursue the American Dream on the income of one wage-earner. I’m really just talking about family values as opposed to greed rules.

1 comment:

Scott Supak said...

I'm with you on the populist furor, but I direct my ire a little higher up, and have different ideas on how to deal with it.

First of all, I don't support a cap. At least I don't think I do. It's interesting to think about. I doubt it would ever happen in this country.

Second, back when those 90% rates were in effect, there were tons of loopholes. The rich never paid that much.

Third, What percent of the owner's income should the players get? Of course, this race to pay the players the most (see Moneyball), raises ticket prices, etc, making baseball a game for rich people only if you actually want to go to the park. But the players are the draw, and it's certainly unfair to pay them like chumps when the owners are raking in many multiples more...

But, yeah, I agree that this is just obscene. Look at this post from the Flowing Data site today. Sickening.

The Bush tax cuts, especially happening in a time of war, were grossly obscene, and cost about what health care would cost. We should start by repealing them early, rather than letting them expire in a few years.

Then, we should raise taxes on the top 5% or so, just to make up for all the loot these robber barons have sucked up out of the system. Conservatives always say it will trickle down and stimulate, but, once again, we see it does the opposite. So, we can shake it loose with higher taxes on the rich, or encourage investment in a green economy through incentives like tax credits.

Funny how I woke up thinking along this line, then found the Flowing Data post, and then found your post... Great minds think alike.