It’s the tax code stupid!
One of my issues with our economy and the shift in share of income has been the tax code. I have consistently stated that something other than the tax rate changed in the code back in 1981 or so when the first change took place. Labor went from being an asset to a liability and thus the rush to reduce all cost related to employees. Messing with the rates won’t do it. In fact, during Clinton’s term the share of income to the top 1% rose 6 points. It only rose 4 points with Reagan/Bush.
Well I was right…sort of. Bill # H.R.3876:
To amend the Internal Revenue Code of 1986 to limit the deductibility of excessive rates of executive compensation.
Income Equity Act of 2007 – Amends the Internal Revenue Code to: (1) deny employers a tax deduction for payments of excessive compensation to any employee (i.e., more than 25 times the lowest compensation paid any other employee); and (2) require such employers to file a report on compensation paid to their employees with the Secretary of the Treasury.
This will be put in under
:(a) In General- Section 162 of the Internal Revenue Code of 1986 (relating to deduction for trade or business expenses) is amended by inserting after subsection (h) the following new subsection:
So, back in 1986 when they raised the rates they also allowed the top to shift the income they were paid so that it would be taxed less. Yup that was real “fair” sharing of the Reagan debt.
It’s not just about rates and it never has been. It is about definitions, and this makes me wonder what else is not in that tax code that use to be. All this bickering about entitlements, and the transfer of income, and welfare etc, etc, etc is just smoke and mirrors. The truth is we can solve our problems as soon as we go back to (return to the pre 1981 code) making it more profitable for the company to pay the help as oppose to keeping it for them self. And when I say for them self, listen to the big CEO’s refer to the company as their company! It also means that any arguments suggesting there is a free market idealism practiced in the labor market are wrong. What is part of determining what a fair wage should be comes from the sections of the tax code that control the definitions of taxable income to whom.
I still believe there were things done in the first change. You can read the reps statement here.
Update: To be clear, the bill linked to here will undo the tax break of 1986 that promoted paying excessive income to the upper company employees. It is a start toward removing the economic royalty of our nation.