by user Michael Smith
President Bush’s recent comments about corporate compensation were less about economics than political posturing. “Income inequality is real,” seems almost laughable coming from an administration that has taken credit for a rise in average incomes (skewed by upper extremes (e.g. CEO pay)), but ignored the fact that median incomes have been flat or falling. A focus on executive pay is little more than a distraction from the loss of working class jobs and the tax policies that motivate overseas corporate migration.
We need fundamental changes in our tax philosophy. A corporate tax is seldom little more than a cost passed through to consumers. And a personal income tax is behaviorally absurd – What do we want to do; penalize people for making money? “From each according to his ability” was discredited with the fall of communism. We should seek to encourage productivity and earning. What we ought to tax is the discretionary consumption that our society seems addicted to.
A consumption-based tax, like advocated by FairTax.org, would put every American’s tax bill under his own control, and American industry could compete on a more level basis worldwide. The subsidized Chinese manufacturer would be taxed at the cash register just the same as the local factory. The American exporter wouldn’t be taxed at home, then again abroad. Our system of capitalism would grow under an infusion of savings and investment, rather than huge amounts of capital stagnating in sub-optimal tax shelters or overseas ventures.
Combined with a focused effort to reduce our huge national debt, trillions of dollars could be returned to productivity for working class Americans. Domestic jobs would be more competitive, paychecks would more closely reflect pay rates, and Americans could achieve financial independence rather than debt and dependence on government programs.
Executive pay is simply a symptom reflecting the lack of opportunity for all but the well-connected. We need the government to return the squandered $9 trillion to the working Americans who need it most, rather than earning interest for the well-heeled investors, many foreign, who underwrite our debt today. Then we need to get the billions held by the richest few Americans into productive use here at home. There’s no need for class envy as long as that capitalist upper class is investing in factories and jobs within a thriving economy.
Let’s remove the inhibitions to earning money here at home, while creating incentives for frugal living within our means, all through logical tax policy.