Tax Excessive CEO Pay Act

[Ranb]

H.R.1979 - Tax Excessive CEO Pay Act of 2021
https://www.congress.gov/bill/117th-congress/senate-bill/794
https://www.congress.gov/bill/117th-congress/house-bill/1979/text

“(A) INCREASE IMPOSED.—In the case of any corporation (except as provided in subparagraph (B)(ii)(II)) the pay ratio of which is greater than 50 to 1 for a taxable year, the 21-percent rate under subsection (b) for such taxable year shall be increased by the penalty determined under paragraph (2).

Imgur had a meme about this. Claims the bill is introduced occasionally then dies. I suppose if they can afford to pay the CEO's so much, they can afford more taxes. Has the same chance of passing as does any law on term limits for Congress.

I also recall reading an anecdote about robots replacing people. If they can replace workers, have them replace the CEO and other corporate officers too. Those might be the AI some people are fearing though.

 

[Dr. Keith]

At some point the CEO stops being a person and is an LLC that provides CEO services as outlined in the consulting agreement.

The only thing stopping this is that CEOs love company perks. You can’t really negotiate premium healthcare and 12 months of COBRA for an LLC.

In case my sarcasm is a bit thick: I support measures like this.

 

[lobosrul5]

And tax all their gains on shares given as compensation as ordinary income! No one should get the long term rate on investments that are payment for work.

 

[Dr. Keith]

And tax all their gains on shares given as compensation as ordinary income! No one should get the long term rate on investments that are payment for work.

I find it weird that we tax the fruits of labor at a higher rate than unearned income.

 

[3point14]

I find it weird that we tax the fruits of labor at a higher rate than unearned income.

That's not a bug, that's a feature.

 

[The Great Zaganza]

It's the kind of tax that gets instituted once all the CEOs found a different, exempt way to get paid.

 

[Random]

I find it weird that we tax the fruits of labor at a higher rate than unearned income.

The argument is that it encourages people to invest, leading to improved economic conditions all around. In an era where there is more money looking to be profitably invested than there are things to profitably invest in, it is just robbery by numbers.

 

[lobosrul5]

The argument is that it encourages people to invest, leading to improved economic conditions all around. In an era where there is more money looking to be profitably invested than there are things to profitably invest in, it is just robbery by numbers.

Yes, and to hold for a least a year, reducing volatility. Also, in my case it's money that was earned before I invested. So it was taxed once already. Plus I'm taking personal risk. Unlike someone being paid in shares.

 

[theprestige]

I suppose if they can afford to pay the CEO's so much, they can afford more taxes.

This is a terrible reason to raise taxes.

 

[Donal]

This is a terrible reason to raise taxes.

More like cut the write-offs.

And make stock buybacks illegal again.

 

[ahhell]

I find it weird that we tax the fruits of labor at a higher rate than unearned income.

Do we? What's unearned income exactly?

Also, what constitutes excessive? Does this apply to actors and athletes?

Taxing the gains on shares is stupid unless you plan on a negative tax on shares that lose value. Sure, tax the gain when the shares are sold as income, otherwise its a tax on fantasy wealth.

 

[theprestige]

More like cut the write-offs.

Then be ******* honest about it: "This tax break no longer incentivizes the way we'd like, so we're discontinuing it."

And make stock buybacks illegal again.

It's also a terrible reason to make things illegal.

 

[Random]

Do we? What's unearned income exactly?

Inherited wealth, rent-seeking, asset-stripping, regulatory capture... There are a lot of ways that individuals can "make money" that do not actually produce anything of value and can actually be a drain on the economy.

There are also outright illegal things like theft, fraud, embezzlement, but I assume you want to keep this narrowed down to legal activities (we'll leave aside the issue of which activities should be legal or not for now).

Also, what constitutes excessive? Does this apply to actors and athletes?

While actors and athletes can be paid a great deal of money, they are at least doing something of value, or else audience will not pay to see them.

Taxing the gains on shares is stupid unless you plan on a negative tax on shares that lose value. Sure, tax the gain when the shares are sold as income, otherwise its a tax on fantasy wealth.

You should probably read up on the "Buy, Borrow, Die" investment strategy.

 

[Donal]

Then be ******* honest about it: "This tax break no longer incentivizes the way we'd like, so we're discontinuing it."

But that isn't true either. In many cases, the tax break never incentivized the desired behavior.

It's also a terrible reason to make things illegal.

A good reason to make something illegal: Rich people like it and Ronald Reagan made it legal.

A just as good reason: Stock buybacks incentivize short-term thinking and a conflict of interest among executives. which is why THEY WERE ILLEGAL IN THE FIRST PLACE.

And if all that offends your sensibilities, don't ask for my ideas about hedge funds and private equity.

 

[lobosrul5]

You should probably read up on the "Buy, Borrow, Die" investment strategy.

Doesn't work at the moment. The cheapest anyone can get margin is about 6% a year right now (IBKR Pro!). Plus, margin interest is at least taxed on the lenders side.

 

[The Great Zaganza]

This is a terrible reason to raise taxes.

On the contrary.

From an Economist point of view, taxes should primarily come from sources where they don't impede economic activity.
Once you have a multi million dollar income, any benefit from more or loss from less is marginal, unlike at the bottom of the income level, where small changes have an oversized impact, both for good and bad.

 

[Dr. Keith]

The argument is that it encourages people to invest, leading to improved economic conditions all around. In an era where there is more money looking to be profitably invested than there are things to profitably invest in, it is just robbery by numbers.

It’s funny to me that capitalism is so fabulous that it needs a tax break to make it attractive.

But back to OP proposal for CEO pay, options and RSUs and PSUs should all be considered “pay” for any such scheme.

 

[lobosrul5]

Taxing the gains on shares is stupid unless you plan on a negative tax on shares that lose value. Sure, tax the gain when the shares are sold as income, otherwise its a tax on fantasy wealth.

Its an unfair advantage over us "normies".

I get paid, that money is taxed upon payment. I can then buy shares, and if I sell at a gain, its taxed.

A corporate officer gets paid in shares. When he sells them his gain is taxed at the lesser long term rate. He gets taxed once. Where if I take the money I earned from my job and invest it I get taxed twice.

 

[Random]

Doesn't work at the moment. The cheapest anyone can get margin is about 6% a year right now (IBKR Pro!). Plus, margin interest is at least taxed on the lenders side.

6% is higher than is has been in a while, but it's still lower than capital gains tax rate. The amount of taxes you can avoid may have dropped, but it can still be viable under the right circumstances, especially if it is understood that the stock will be sold to pay off the loan at the start of negotiations. You could probably get a lower rate at that point. Big Banks are more than willing to work with you if they can make enough money off their cut of the avoided taxes.

 

[Dr. Keith]

Do we? What's unearned income exactly?

https://itap1.for.irs.gov/owda/0/re... investment-type,unearned income from a trust.

“Unearned income includes investment-type income such as taxable interest, ordinary dividends, and capital gain distributions. It also includes unemployment compensation, taxable social security benefits, pensions, annuities, cancellation of debt, and distributions of unearned income from a trust.”