TAE's Fantasy World

In response to this post, on which I am about to expand, I was accused of being a communist. First, this is such a straw man accusation, as the term "communist" is really a cover for "dictatorship by a team" in the modern sense. Kind of like "Intelligent Design" nowadays means Creationism.
And secondly, I'm actually talking about socialism, not communism, thank you very much.

The idea I proposed was hypothetical plan in which an individual's income could not exceed  $200,000 gross. If they earned more than that, it was taxed 100%. Now let me expand this, in the face of a growing bout of criticism. First, the number does not have to be $200,000, although I think that is a good amount. It is extreme wealth, if you look at incomes world wide. It is extreme income, for 95% of Americans. You can live comfortably, anywhere in this country, on that kind of money. You can provide a good college education for your children, pay for their piano lessons, take fun vacations annually, and buy nice clothing for yourself. You will not worry about putting food on the table, at any time. You can eat out regularly. These are the luxuries of regular American life: eating out, occasionally buying toys for yourself and family, and traveling across this diverse nation on multiple vacations. These, and more, are easily attainable on 200k. What isn't attainable is living like Paris Hilton. What isn't attainable is attending Diddy's White Party. What isn't attainable is a second home in Boca and a third home in Aspen. Those aren't the luxuries of American life; those are the luxuries of American Gentry, and the winners of lotteries.
And yet, the extreme end of luxury is what American culture defines as desirable. Certainly, its okay to want to take vacations to Aspen. But a whole society measuring "success" as the ability to buy a summer home in Aspen has skewed reality. An annual income of a million dollars is now the low benchmark of true success in this country.
So you can choose any amount you want, really, in my fantasy world of fixed incomes. It could be $200k, or it could be $350k. Under $500k though. Above, it asymptotically approaches absurdity.

Businesses are not hindered by this limitation. Lockheed-Martin can still obtain $38 billion dollars in government contracts as they do now. The only difference is they cannot pay their CEO "a base salary of $1,834,615, a cash bonus of $9,146,000, stocks granted of $2,558,120, options granted of $6,564,800, and other compensation of $369,916." Or rather, the could pay him that, but he would have to immediately forfeit $20.2 million of it to the government. So almost certainly they wouldn't.
Small businesses, similarly, could obtain as much revenue as they wanted. But they could only pay their employees (and owner) $200k a piece max, the rest would either have to be reinvested in the business' growth or divested into other interests and/or equipment.
The immediately argument I received is that this would disincentivize talent from becoming C-level employees of American businesses, as monetary compensation (justified or not) is the primary method by which these companies attract talent. "Talent would outsource itself to less restrictive economies."
To which I add an even more totalitarian creed to my fantasy world: in order for a business to sell goods in the United States, it must have at least 51% of its work force located inside the US border, and must agree to the pay rules in place here.

Obviously, I am delusional. But this is a thought experiment. What would the country look like if companies could not acquire and retain talent via money? How do you create a workplace where people get something from it while not catering to their greed?
And what would people in this country do, if their celebrity base collapsed? Though movie stars could still be movie stars...their mundane lifestyles would be...well they'd be little less entertaining. The "Real Housewives of Orange County" would suddenly be a lot more real.

What would a company, like Lockheed-Martin do, given $20.2 million dollars that it suddenly had that it couldn't use to pad the already exorbitant wealth of Bob Stevens? Instead, they could pay another 202 employees an extra $100,000.
And suddenly my plan starts to make sense. A really, really talented engineer, with maybe 5 years experience, could probably be making close to $100k at Lockheed-Martin. But that engineer could make similar money elsewhere, at some lower-size company with more opportunities for advancement but less revenue/profit. But I imagine that same engineer could be easily retained by L-M given a $50k pay increase! And it is no sweat, for L-M, in this scenario because they simply are obeying the law. The exorbitant, almost unspendably large amount of income their CEO was receiving is instead being distributed to hundreds of employees who now can realize a significantly improved lifestyle, and L-M essentially locks in their loyalty.
Am I so delusional? I humbly submit the idea that a CEO is worth $20.2 million a year but the most talented engineer at that company is worth only 1/100th of that is equally delusional. And yet that is the current status quo, all across Corporate America.

I'm really curious, to be perfectly honest, what are the exact arguments people can make in favor of income levels above $200k. Let's ignore the idea that growth will stop, that is a straw man. The people who argue this are the ones that say the upper class are the primary drivers of the economy, because they have the money to consume in large quantities. Under my radical delusion, less people would make millions, yes, but thousands more would make six figures, and be propelled into this purported economy-driving income stratosphere.
I really want someone to look me in the face and tell me that $200,000 a year is not enough for them to live on. I really want to see their face as they tell me this.
Others might argue that having such an income limit will "hurt small business." Isn't the idea of a small business that incomes are low? If your small business is doing so well that you can pay yourself >$200k a year, you need to write a book about how to start a small business. Something like 95% of small businesses fail in the first 5 years. Perhaps this is because they are paying themselves too high a salary!
But, I could make a pretty fair argument that the "small business is what drives America's economy" is a hokey, pandering comment and doesn't really reflect modern society. If one third of American workers work in the financial sector, as has been reported, then a fair argument would be that publicly traded companies are now what drive Americas economy, or at least what scuttle it.

But I digress. I don't seriously believe that legislation ever could, or even should be, passed which limits a person's income to $XXX,XXX. I do believe that we as a society have lost touch with exactly how many dollars equals success. I do believe that modern American fiscal law and society has created a scheme where the rich are getting richer directly at the expense of the poor, and the poor celebrate it. Exorbitant wealth seems like it would be pretty awesome, even I admit. I'd love to have a jet-motorcycle like Leno, or a private plane to take me to my private grotto in Bora Bora. But it's pretty naive for me, or 99% of Americans, to believe we'll ever live that lifestyle. And it's pretty goddamn misguided for people making $35k a year to send me hatemail that my theoretical $200k will oppress their freedom. Or that such an income cap would destroy America's economy.
Then again, I can't prove that last statement false. But I humbly submit: if America's economy is completely dependent on the ability of Americans to become exceptionally wealthy, if our economy would be crippled by forcing people to be only "really rich" instead of "massively, absurdly, disproportionately rich" then we need to take a serious look at ourselves and the economic situation in which we've placed ourselves.
Certainly, parts of the economy would suffer greatly if we eliminated the ability to be extremely rich from our society. Places where their economies are the worst in this recession, like Vegas, would be dampened by the inability to attract big spenders. Or would they? Could they potentially be buoyed by the sudden influx of people making six figures due to corporate salary restructuring? Sure, a millionaire might drop a lot of money there over a weekend. But consider whether that millionaire would really boost their economy more in that one weekend than five people making $200k over five weekends. It seems to me that high-end-catering economies might actually be rendered less volatile.
Similarly, the real estate market might flounder, as very few would be buying $750,000 homes anymore. But conversely, wouldn't the housing market actually benefit, as instead of one millionaire home-buyer you'd instead have (theoretically) five $200k people buying homes by moving that salary down the corporate ladder. How would corporate morale change, if more employees could "live like the CEO?" How many C-Level employees would do well to eat some humble pie? The show "Undercover Boss" exists for a reason!

How exactly would an elite US company retain top talent if not with monetary compensation? That is the topic for another post. And it is a pertinent question for me to ask, as I still dream of owning my own engineering firm one day.


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