So Crazy It Might Work

Yggy comes up with a plan: Forget pay reform for CEOs, just tax the money instead.

[W]e actually have a well-established method of taking market distributions of income and trying to transmogrify it into a more just, useful, and welfare-enhancing deployment of social resources—taxes and public services. The world of finance has been the main driver behind the growth in inequality at the extreme high end, and establishing additional tax brackets with higher rates would help lean against that trend. So would something like the Obama administration’s proposal to curb the extent to which high-income individuals can shelter income from taxes through itemized deductions.

And it has the added bonus of affecting all those crazy compensation packages in all the industries, not just finance. Look at it this way, if you are making $20 million a year in compensation now and the massive bulk of that is taxed at 35% now, which would you rather see the government do to that package if you had the choice:

Plan A) Get $20 million but be taxed on the stuff higher than $10 million at say, 50% instead of 35%,

or

Plan B) get my compensation cut to $10 million by the government pay czar, but keep the 35% tax rate.

Plan A, I'm ahead $5 million and so is the government. Seems like a win-win to me. Drop the pay czar, make new tax brackets for the mega-rich if you're going to do stuff like this. I think this is a good idea if done right...which means it'll never happen.