Capping the earnings of the wealthy isn't a new idea, we just did it differently back in the day
You may recall, before the whispers of a shutdown began in Washington this past summer, much of the talk centered on raising the $7.25 minimum wage ($2.13 for tipped employees). During some of the discussions I had on the topic, I was also probed regarding my opinion on a “maximum wage.”
Well, first off I think the raising of the minimum wage should take obvious priority, it is long overdue. People can’t live healthy or properly when they now earn about $7,000 less in a year compared to the late nineteen-sixties. 70% of Americans believe there should be an increase, whether moderate or significant.
Where I live in Quebec, the minimum wage is $10.15 with a lower cost of living than many American cities, and people still struggle here (higher sales taxes don’t help). I can’t imagine how bad it is south of the border.
Anyway, to the question at hand; is it time to for a maximum wage? Well… If you asked that question to a free market capitalist they would likely slap you across the face with the mere suggestion. It’s the American Dream to make as much money as humanly possible (and buy your way into the American political system.) If ask me however, with the current tax system in place I would say a definite maybe, but we shouldn’t need one.
Income inequality has been a growing problem in the US since the greed of Reagan’s 1980s, but creating a cap for the wealthy isn’t exactly the best way solve the problem and it would in fact create others.
First of all, where would you place the limit in the first place? How much is too much for an annual income? $50 million, $100 million or $1 billion? The answer is probably different for everyone. Secondly, when investors know they can’t make beyond a certain amount, they’ll stop investing. What is the point of risking your money if there is no more money to be made? This could have serious economic ramifications depending on where the cap is set.
On the other hand, if you’re a member of the Walton Family picking your ass, pissing on the poor and sitting on billions of dollars while waiting for your next dividend check to arrive, something needs to be done. No person or family on earth is deserving of a hundred billion dollar fortune. Especially those who don’t put it to good use.
The reason I said we shouldn’t need a maximum wage is simple; It’s all about the tax system. Back in the 50’s, 60’s and 70’s, the tax system acted as a maximum wage without actually setting a limit.
If you were an entrepreneur back then, your taxes were moderate until you hit the $3 million dollar mark (in today’s currency). After hitting that level you were taxed up to 90%, but only on the money you made after the first $3 million. You could still get very wealthy without a cap on your income, but it was near impossible to get ridiculously (Walton Family type) rich.
That kind of tax system not only allowed entrepreneurs to get continuously wealthier, it made the whole country wealthier. I don’t think there were too many millionaires complaining about the moon landing being a waste of their tax dollars.
You’ll never see that kind of tax rate again of course, not in the age of globalization and free trade. But there is nothing stopping us from going back to the 1980’s and reversing Reagan’s tax cuts on the wealthy (about 74% when he came into office, 38% when he left.)
Nothing stopping us that is, except for the business end of the Republican Party who continue to preach that taxes are bad, taxes on the wealthy in particular. Even with a tax rate as high as 70%, there is still plenty motivation and incentive to invest (getting richer of course!).
To sum up my answer, the idea of a maximum wage sounds good when you think of all the billionaires getting away with… billions I guess, but there are better solutions out there that have worked in the past and would work again. We just have to find a will and a way to change it.