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Friday, February 06, 2009

Soak, Don't Cap

By Keith R. Schmitz

As the phase goes, the rich are different from you and me. That's because in this country there are a class of people who are not rich and often far from it, yet think it is a great idea for a minority to make an ocean liner full of money -- at our expense. They celebrate it and they fervently defend it against any attacks. It puzzles the rest of us.

Of course President Obama's suggestion about a cap on the salaries for people in the companies that we tax payers are bailing out brought out the howling -- and not necessarily from those who would be impacted by the sanction.

But on that point there is one good idea that was in the NY Times.

Reed Hastings the CEO of Netflix suggests that a pay cap is not necessarily a good idea, because if a company sincerely wants to get out of a hole they have to attract talented people.

So he suggests how about a hefty tax increase on those making over $1 million to 50%.

Just about all of us have a talent for something and bust our behinds. Grant you there are those who have remarkable ability for making things or making things work better and no one begrudges their reward. Warren Buffett. And he is now in the process of giving it away.

But for large part the way to make huge riches is through leverage. Once many corporate heads get control of the levers of their business they basically arrange it so large portions of the firm's revenue flow into their pockets. Now, exactly how does leverage benefit us?

I agree with Hastings in countering the argument of why would people work harder if they get taxed more. He suggests that people who enjoy the challenge of what they are doing will keep on doing it.

As the new age phrase goes, do what you love and the money follows.

As for those who are strictly in it for the money, society shouldn't enable that kind of pathology.

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