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The Daily Wildcat

The Daily Wildcat

 

    “Playing Robin Hood: Increasing taxes only for executives wrong, unethical”

    This week, Democrats in Congress will likely succeed in pushing through legislation that will effectively increase taxes for corporate executives and the firms that employ them.

    While some advocacy groups might praise this as a federal step to reduce the income gap between executives and their employees, legislation that increases taxes for only wealthy CEOs is both a practical misstep and an ethical error.

    Subscribing to a pay-as-you-go budget that essentially requires Congress to raise revenue to cover the costs of tax breaks and new government spending, the Democrats must now look for ways to cover their expenditures. And since nobody gets elected by covering their costs by imposing sweeping taxes on the middle-class, liberals have found a piggy bank that can be broken into 1,000 pieces with minimal tear-shedding – corporate executives.

    In fact, the legislation is projected to raise $900 million over the next ten years in tax revenues, all without raising taxes from the voter base the Democrats are hoping will sweep them into the Oval Office.

    But the tax increase is both pragmatically and morally rotten. And one needn’t love CEOs to think so.

    Practically, the tax increase has at least two (and probably more) problems. First, because of the way the legislation was designed, the provision would effectively allow the government to exercise some control over the kinds of compensation packages firms can offer their employees.

    The Chairman of the U.S. House of Representative’s Ways and Means Committee and the House’s chief tax writer, Democrat Charles Rangle, D-N.Y., stated, “”I don’t want to get involved in setting people’s salaries.””

    And rightly so. Government interference in establishing price ceilings and floors creates mostly negative consequences, and a provision that restricts firms from freely paying executives is as foolish as the federal minimum-wage hike this legislation is attached to.

    Additionally, reducing the kind of compensation packages businesses can offer their executives threatens to decrease their competitiveness. Unable to attract top executives, businesses face the possibility of, well, doing less (or less efficient) business.

    But for all its practical misgivings, the tax provision is most flawed in its unethical application. To many, taxing the very wealthiest of America citizens to fund government spending and federal tax cuts feels just fine, either because we feel they can spare it, or because we think we could spend it more appropriately (fairly, charitably, etc.).

    This sentiment, however, ignores the moral autonomy of both those wealthy individuals and the companies that pay them. It frustrates the free attempts of a firm and its employee to decide on appropriate compensation. In most cases, it is presumptuous to think that we have a right to a wealthy person’s income because we disagree with how they choose to spend it, or even that they earned it, and this case is no exception.

    To tax people with more money because they “”should”” pay it or can pay it is a tax on their preferences. But most importantly, in this case, it is a tax on their profession.

    Wealthy Americans who qualify for the highest tax bracket may already be paying the same percentage in income tax as, say, a professional basketball player. Yet corporate executives are absorbing a federal cost that pro basketball players are not being forced to contribute to, and it’s simply because people dislike and distrust CEOs because they make so much more money than the non-executive employees in their firms.

    In fact, Sen. Jim Webb, D-Va., mirroring his party’s apparent commitment to average Americans, railed against CEOs for making 400 times as much as their employees, instead of the mere 20 times more they were earning when he graduated from college.

    To be sure, executives make substantially more money than their employees. But to use that fact as a justification to take it away is a non-sequitur.

    It would be like stealing an executive’s expensive car and giving it to his factory workers who produced it because we don’t think his normal tax burden is beneficial enough to the community. (Or, imagine imposing additional taxes on Steve Nash because he makes hundreds of times the income that U.S. Airways Arena employees do.)

    While this argument presents strong challenges to our scaled income-tax system, it speaks more to the unethical nature of levying tax burdens on corporate executives because they’re corporate executives, on funding excess federal spending by targeting private citizens who are particularly disliked.

    Corporate executives have made themselves valuable to their businesses in the same way that professional ball players have made their talents valuable to the NBA – by generating substantial revenue.

    For Congress to decide that CEOs do not deserve what their firms are willing to pay them and then take steps to implement such a reduction is not only impractical and inefficient. It’s also just plain wrong.

    – Stan Molever is a philosophy senior. He can be reached at letters@wildcat.arizona.edu.

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