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Income Inequality 1/25/2004 9:56:35 AM
Two articles in the New York Times today, by Gretchen Morgenson and David Leonhardt, brought up the issue of growing Income inequality. Both are good articles.
The principal problem with upper-class salaries rising faster than lower-income wages and salaries sets squarely upon the fact: these upper-salaries determine the wage remuneration for all labor as a Class. They possess a personal and Class interest in staying ahead of the Curve in questions of Salary.
There are several proposals to limit Corporate Executive compensations, and well as raise Minimum Wages etc. None will adequately handle the problems involved, as it is basically a Economic statistical problem. There is no way to adjust Compensation without retarding economic initiative, unless you handle it in a economic model. This means insertion of economic triggers, something effective only in Tax law.
Tax Accounting law could insist Labor receive only a statistical percentage of total Product Sales Profits as compensation, according to a set percentage criteria between Labor and Management. Totally unworkable because lower Incomes would eventually lose their present Wage gains.
A more effective Tax Accounting procedure would set only Management compensation to Product Sales Profits. An effective Tax law could state Management salaries could get Corporate deduction as legitimate expense only equal to the salary of the highest hourly Wage Employee of the Corporation, and anything above this amount would be accounted as Corporate profits and taxed. Management salaries would be subtracting from Corporate Profits, not from Employee salaries. It is a very complicated maneuver, and Congress and IRS could do better simply stating a Corporation may deduct up to $100,000 per Employee as Labor expense, leaving all else subject to tax. A highly efficient proposal which leaves the issue of necessary compensations to Business enterprise.
Another proposal of Tax law would simply state: Exercise of Stock options is Corporate Employee compensation, and all funds must be registered as labor compensation with application of the above limited labor deduction per Employee, so Corporations must pay for Stock Options as Corporate Profits previously untaxed.
None of the Proposals for correcting Income inequality ever work perfectly, and some hold economic detriment. There is evidence, though, of a lack of equal opprotunity through economic participation in setting compensation levels. Disparities will eventually have to be corrected. lgl
