Tax, Not Shame

Reed Hastings, founder and CEO of Netflix and a Democrat, had an Op-Ed in New York Times opposing Obama's plan to cap the executive pay of those managing financial institutions receiving public largesse in order to get credit moving again and prevent a decades-long slump.

Instead he proposes executives like him be taxed of half their wealth instead of a third. Fine.

In the meantime, Obama's plan seems like a good idea. Says Hastings:

Another advantage is that it would also cover the sometimes huge earnings of hedge fund managers, star athletes, stunning movie stars, venture capitalists and the chief executives of private companies. Surely there is no reason to focus only on executives at publicly traded companies.

This week, President Obama proposed imposing a $500,000 compensation cap on companies seeking a bailout. It’s a terrible idea. We all want the taxpayers' money returned, and capping compensation at bailout recipients will just make it that much harder for those boards to hire and hold on to the executives who can lead their companies to compete and thrive.

Perhaps a starting place for "tax, not shame" would be creating a top federal marginal tax rate of 50 percent on all income above $1 million per year. Some will tell you that would reduce the incentive to earn but I don’t see that as likely. Besides, half of a giant compensation package is still pretty huge, and most of our motivation is the sheer challenge of the job anyway.

As Dr. Evil would say, right...

I just don't see a tax increase as politically feasible at the moment, maybe when the economy picks up. My points to Hastings would be:

1) the boards of the companies in the financial market got us in the position we are in, so who cares if they have a tougher time hiring and holding competent executives. They can't do much worse than they've done already.

1a) star athletes, stunning movie stars, venture capitalists and the chief executives of private companies didn't get us into this mess and their industries aren't being bailed out by obscene infusions of public money. Yes hedge fund managers played a substantial role but there is already talk of regulating them.

2) executive positions at companies backed by the government - essentially saved by the government and the taxpayer - will be more desirable than at companies no one trusts. Especially if you figure in his point that executives are mostly driven by the sheer challenge of the job.

3) If he had proposed that once the economy recovers, pay caps should be removed and taxes increased, I wouldn't suspect his motives. But since he doesn't, I will never be using Netflix, not that he would care.