Minimum Wage, Taxation and a solution to the income inequality divide...

[glenn1]

Some businesses become big and profitable because they do things right. Often times though, they lose their way once they are big and profitable. But because they are big, profitable.... and now powerful, they can maintain their position in the market, while not providing good services, value etc...

I can provide many examples of this. In many industries.


Banking. Would you argue that large banks (Bank of America, Wells Fargo etc) provide better value to consumers than a credit union or small local bank, generally?


Cable companies, cell phone companies etc... Verizon, AT&T, Comcast. Again, do they provide better value than small municipalities or companies that aren't chasing record profits?


Big Box Retailers. Walmart etc... Do they provide better value/service?


I could go on and on. Now certainly, some businesses that become large do so for the right reason and stay a strong, quality business. And that's fine. All I'm asking is that if they achieve that status, once they reach a certain point of profitability, to share those profits with their employees.


You mentioned we would be subsidizing the small busineses that aren't run well. That's no the case, at all! They will still be taxed. We aren't GIVING them money. We are just taking less. We aren't encouraging inefficiency, because paying higher taxes will still mean larger profits. It just scales and gives diminishing returns. There is a point where the extra efficiency cost for more profits (or paying of lower wages) will NOT be worth the extra taxes on those hefty profits, but that won't be till you reach the higher end of the profitability scale.

So basically your problem is that too many people patronize big businesses you don't like. If only the uneducated masses could be taught how wrong they are to use Bank of America, Comcast, and the like we'd be good. But in lieu of that, we should just raise taxes on thei the big company profits so that they can't scale up to serve as many clients, and the uneducated yokel consumers will be forced by default to use the smaller businesses you prefer.

 

[momeNt]

Every person and company exhibits tax avoiding behavior.

Take everything you said, and now think of ways that these entities will avoid being taxed.

Now fix that problem.

 

[Londo_Jowo]

Not at all. The 'whole problem' is the income inequality gap in this country. I stated that in my original post. Did you think I was excluded from that gap? Of course not. Using the pronoun "I" was simply a way of showing that there would be people in favor of this 'pipedream' even at the cost of stocks not performing as well.


*edit* And not that I feel it is necessary to humour you, but I will anyway. I am financially comfortable. I am not concerned with my own well being (at least not currently). I am concerned with the well being of our entire country. I see the road we are headed down. Eventually, a large portion of our society will be in this boat, not just the ~30% that we have now.

In addition, I have owned small businesses (and run one now) work for a large corporation with obscene profits and am working n a Masters program, which when finished I will most likely be working for myself. So as you can see, I'm firmly entangled with all elements of the discussion. And long term, I should be just fine, as I will not be working for a super-corporation. That doesn't mean I don't want the rest of our country to suffer though.

I feel that people should get out there and work for what they get like I did. At 19 I realized working in a grocery store was not going to provide me the life I desired so I joined the military. After 12 years of service I felt I could do better for myself working in industry, 23 years later I'm doing quite well and have a decent 401k to supplement my SS benefits when I do retire.

I choose not to worry about those who make it big in their life whether it be inheritance or successful business venture. I don't see you tax scheme enhancing the lives of many, in fact I see it hurting more than it helps. If companies are going to be taxed higher for their success then why try to reach that point, why not operate below that level to avoid the taxes. By doing the later the business will not require as many workers and stock holder will lose due to lower profits.

 

[Anarchist420]

even though nationalism is a revolt against nature, egalitarianism is a revolt against nature too and the OP doesnt seem to realize that the govt actively makes many corporations richer than they would be in a free society.

Every person and company exhibits tax avoiding behavior. Take everything you said, and now think of ways that these entities will avoid being taxed. Now fix that problem.

+1.

 

[Londo_Jowo]

consumers will be forced by default to use the smaller businesses you prefer.

And quite possibly own. Could it be he sees the lack of his business is due to his inability to compete with these big box businesses and make a good profit? So these businesses must be punished in order for him to have a decent chance at success.

I have owned small businesses (and run one now)

 

[PokerGuy]

OP, what you're trying to do would not solve anything. Trying to put some artificial limit on profits (trying to define "obscene profits" should be fun) is bound to fail. After all, one of the fundamental underpinnings of capitalism is that companies will become more efficient because they will seek to maximize profit. Besides, if you think companies wouldn't have an army of accountants / lawyers find ways around those restrictions, you're delusional.

The entire concept is stupid: "sorry Mr Jobs, doesn't matter if you brought a product to market that everyone wants, you can't make that big of a profit, it's just not fair". It's dumb.

I do think the growing wealth gap between the have's and have nots is dangerous for a society, as is the reduction in mobility between wealth classes. The middle class is critical for a strong country, and it seems to be vanishing quickly.

 

[notposting]

While changes could be made to the tax system (like closing loopholes, exemptions, offshore bs, etc), I think the more important change needs to be in the overall mindset.

We were not founded as a capitalist utopia.
Following from that, our government's role is to improve the quality of life HERE, for our entire country -- not necessarily ensure that our corporations who "donate" to them make the most profits possible. Our government should be working to help our business who do more here -- a shell corporation that provides thousands of jobs to another country, that enriches a few high level corporate execs and assorted pols/bureaucrats, and avoids taxes somehow is NOT making our country better.
Politicians (that's a career that just shouldn't exist, btw) should not receive bribes, kickbacks, campaign contributions, specific jobs for x-years post-term, whatever you want to call them.

Unfortunately, most of this stuff is so tied together (throw immigration in, trade practices -- many countries are merrily protectionist in both, yet bitch when the US does anything to impede their enrichment) that trying to do anything results in nothing happen and the status quo continuing.

And our current political environment is so polarized on the surface that it is practically broken (though under the surface, all those assholes are contentedly raking in the bribes and post-term consulting gigs).

Damnit, P&N just depresses me (not the forum per se, just our current "real life" environment).

I would honestly prefer for a semi-random* smattering of posters from here running things than our current so-called leadership, honestly.

*well, veto power to keep a few of the obvious ones out

edit: and to the OP and the posters in the thread who have made reasoned, intelligent comments, thank you.

 

[Cuda1447]

And quite possibly own. Could it be he sees the lack of his business is due to his inability to compete with these big box businesses and make a good profit? So these businesses must be punished in order for him to have a decent chance at success.

You're a difficult person, aren't you? I don't know why you keep intending to make this a personal debate, rather than big picture. My thoughts on the subject have absolutely NOTHING to do with my own personal business, which is more of a hobby than a true business anyway.

 

[Cuda1447]

OP, what you're trying to do would not solve anything. Trying to put some artificial limit on profits (trying to define "obscene profits" should be fun) is bound to fail. After all, one of the fundamental underpinnings of capitalism is that companies will become more efficient because they will seek to maximize profit. Besides, if you think companies wouldn't have an army of accountants / lawyers find ways around those restrictions, you're delusional.

The entire concept is stupid: "sorry Mr Jobs, doesn't matter if you brought a product to market that everyone wants, you can't make that big of a profit, it's just not fair". It's dumb.

I do think the growing wealth gap between the have's and have nots is dangerous for a society, as is the reduction in mobility between wealth classes. The middle class is critical for a strong country, and it seems to be vanishing quickly.

I'm not saying he can't make that big of a profit, I'm saying if he does it will be taxed severely. Two choices, pay the taxes or share the profits with your employer.


The entire concept is stupid because.... it's dumb? But why is it dumb? Because it limits out wealthy individuals can get at the expense of the entire nation? You think that's dumb. I think that's smart. *shrugs*

 

[sm625]

Taxes have to be raised, and raised a LOT. Both corporate taxes and the top marginal personal income tax rate. Right now we have an environment where the top 1%, thru corporations that they primarily own, are just running away with the entire economy. It will either end with the bottom 99% rioting, and/or electing people who will actually represent them. Right now 99% of congress represents only the top 1%, although they do throw bones to the bottom 20%, mainly to keep them from rioting.

This dynamic is highly cyclical. It has happened before and it will happen. Interest rates will rise in response to these changes.

 

[Cuda1447]

I feel that people should get out there and work for what they get like I did. At 19 I realized working in a grocery store was not going to provide me the life I desired so I joined the military. After 12 years of service I felt I could do better for myself working in industry, 23 years later I'm doing quite well and have a decent 401k to supplement my SS benefits when I do retire.

I choose not to worry about those who make it big in their life whether it be inheritance or successful business venture. I don't see you tax scheme enhancing the lives of many, in fact I see it hurting more than it helps. If companies are going to be taxed higher for their success then why try to reach that point, why not operate below that level to avoid the taxes. By doing the later the business will not require as many workers and stock holder will lose due to lower profits.

In response to your 2nd paragraph:

Companies will be taxer higher for more success. They will still try to reach that point though, because it will still be success. To use an (admittedly poor) analogy, in a football game, if the score is caped at a maximum of 100-0 and then the winning team can't win by anymore than 100, it doesn't mean they won't try to reach 100. They still will go for the win and build as large of a lead is allowed. It won't impede businesses desire to be profitable, it'll just set a limit to it. At that point, more success can be met with sharing those profits with everyone else in the company through higher wages, thus creating a happier, more stable and more talented work force, which also helps the company. In fact, it might help the company MORE than just feeding the stock price/ultra rich.

 

[PokerGuy]

I'm not saying he can't make that big of a profit, I'm saying if he does it will be taxed severely. Two choices, pay the taxes or share the profits with your employer.

So you seek to create a disincentive for success. Brilliant. I'm sure that will work wonders for our economy.

The entire concept is stupid because.... it's dumb? But why is it dumb?

It's dumb for a myriad of reasons. From a practical perspective, it would simply not be workable, there would be millions of loopholes found/created, and there's no evidence to suggest that what you describe would have any meaningful impact on the problem you set out to solve.

Beyond that, it's dumb because it undermines the entire concept of companies becoming more efficient to maximize profit. Why be more efficient if the additional profit will just be taken away anyway?

Because it limits out wealthy individuals can get at the expense of the entire nation? You think that's dumb. I think that's smart. *shrugs*

You're quite naive if you think that's what would actually happen. In case you haven't noticed, the income / wealth gap has been expanding even more rapidly with people in office who supposedly want to reduce or close it.

You need to create incentives that make it more beneficial / profitable for the company to share profits with employees, not penalize success.

 

[Cuda1447]

So you seek to create a disincentive for success. Brilliant. I'm sure that will work wonders for our economy.



It's dumb for a myriad of reasons. From a practical perspective, it would simply not be workable, there would be millions of loopholes found/created, and there's no evidence to suggest that what you describe would have any meaningful impact on the problem you set out to solve.

Beyond that, it's dumb because it undermines the entire concept of companies becoming more efficient to maximize profit. Why be more efficient if the additional profit will just be taken away anyway?



You're quite naive if you think that's what would actually happen. In case you haven't noticed, the income / wealth gap has been expanding even more rapidly with people in office who supposedly want to reduce or close it.

You need to create incentives that make it more beneficial / profitable for the company to share profits with employees, not penalize success.

I'm not creating a disincentive for success any more than ANY tax creates a disincentive for success. Your logic indicates you are against all forms of taxation, not just my idea?

I don't know why what I proposed wouldn't happen. Certainly there are details that need to be ironed out. But at it's surface, it seems to me to be a solid plan.

Your last sentence - Feel free to offer up alternative ideas. That's what we are here to do, find a solution. I've given you the best I can come up with currently. If we crowdsource this shit though, maybe we can think of a better solution?

 

[Atreus21]

Admittedly, I'm not the foremost authority on the subject. I do like to think I have a basic understanding of economics, business and society in general. I've read a lot about the proposed minimum wage increase and subsequently why it will fail. I think it's obvious we have a 'middle-class' problem. To many people are living below or near the poverty line, while the ultra-rich become even more rich. It doesn't take an expert in economics to understand the relationship between the two.

So, let me propose a possible solution. Feel free to explain to me why it will not work.

The key is through taxation, simpliefied taxation, and fair taxation. In other words, the tax code needs to work like we intend it, without loopholes and special privilages for a select few.

It's really very simple. If you raise the minimum wage, small businesses will go out of business as they can't afford the increase in wages. Large businesses will likely just increase their costs to consumers to pay for the extra payroll and in the end will we have the same result. Businesses will continue to make record profits and we will have higher unemployment.

Okay. I'm with you.

Instead, we tax profits. I don't know exactly where the line is, but we need to determine what is a healthy profit. Perhaps this is determined by company size. We have a progressive tax where (hypothetical numbers) the first million of PROFIT is taxed at 15%, 10million is taxed at 25% and so on and so forth. Once you reach a certain point, taxes should be high enough to really limit the effectiveness of driving up profits beyond that point. I'm alright with having a conversation regarding larger companies tolerating larger profits. Almost like a profit per employee calculation. But, there needs to be an upper limit to where companies cannot make obscene profits.

I know, its really very simple, but why shouldn't it work effectively?

If you have a modest understanding of economics, you should understand the essential role of profits. They signal to prospective competitors that there's a lack of good competition. Large profits invite competition. Small profits signal that competition is already in place.

Secondly, profits, however large or small, are necessary to promote entry into business in the first place. It's not fair to tell people who take enormous risks that they will be penalized if they are too successful. If someone starts and conducts a business legally, he should be allowed to make as much money as he possibly can.

Lastly, attaching a ceiling to a gross amount of profit is a bad idea because it doesn't take into account profit margin. Many people think oil companies make obscene profits just by looking at the raw amount. The only honest way to look at profit is with reference to a company's revenue, similar to looking at national debt as a percentage of GDP.

The small businesses it won't affect much. The struggling businesses it won't affect (or maybe it will help them). The super profitable businesses won't be able to grow to gargantuam sizes. They can maintain a healthy profitability going forward. If they have extra profits, they can spend that money on employee wage increases to entice better talent to work for you. Thus, the company can still 'profit' in a way.

The downside. Company stock will go down. Stocks will not be worth as much as they once were, because once they reach a certain point of profitibility, they will have severely diminishing returns. If employers continue to push profits (only to pay more taxes) without increasing the wages of their workers (think Walmart) than the money they pay in taxes will just get spent on Welfare etc.. to benefit those workers that aren't making a fair wage. One way or the other, a fair share of those profits will go towards the employees/citizens of the country. But it would be in the best interest of the businesses to pay it themselves, rather than it being siphoned through taxation, as it will allow that business to recruit better talent and be more competitive in the labor market.

In the end, what you're really talking about is using government to enforce its definition of "fair". That's not freedom.

Fundamentally, you have to choose between equality and freedom. I realize we should expect some type of balance, but Milton Friedman said it best: Emphasize equality over freedom and you get neither. Emphasize freedom over equality and you get a high degree of both.

Now, I understand this is somewhat anti-capitalism. Hell, some of you might call if a form of communism. Such a dirty word. But let's be honest, the system we have now is going to shit. It isn't sustainable. Something has to change. The world has to embrace new ideas as we don't live in the same world we did in 1900.

I don't see why this system, if enforced fairly, would not work. I look forward to having a discussion with all of you.

Well, I'll be friendly and not call it communism. But the difference between what you're espousing and communism is a matter of degree, not ideology.

Our problems now are caused more by government than by free individuals acting in their own interest. There is no economic action a government can take that won't have unintended consequences which make the overall situation worse. And when it does make the situation worse, without fail government will claim to have the cure to the problem it created (for which it will never take real responsibility).

To me, all economics boils down to the simple claim that in a free exchange between two parties, a third party has no business arbitrarily imposing its definition of fairness.

 

[Matt1970]

I'm not saying he can't make that big of a profit, I'm saying if he does it will be taxed severely. Two choices, pay the taxes or share the profits with your employer.


The entire concept is stupid because.... it's dumb? But why is it dumb? Because it limits out wealthy individuals can get at the expense of the entire nation? You think that's dumb. I think that's smart. *shrugs*

Because you are punishing the very success that everyone strives for. Those big profits go into hiring new employees, expanding the business, research and development.

 

[BoberFett]

Can I get an exact definition of "obscene profits"?

 

[Cuda1447]

Can I get an exact definition of "obscene profits"?

I can't give you an exact definition, but I can provide an example.

http://finance.yahoo.com/q/ks?s=VZ+Key+Statistics

Verizon, 70 billion in profits with 112 billion in revenue over the last 12 months. This for a company with 178,000 employees, which represents a profit of around $400,000 per employee. Exclude the top 1% of that company. What do you think the average salary of an employee is there? $60,000? I wish I had these numbers, Im genuinely curious to know.

That is obscene profits. These profits are most certainly not shared with their employees. This is a company that is known for having atrocious customer service, overpriced service and obviously low payed employees. Yet they are an industry leader because our 'free market' is completely broken.

If Verizon made 35 billion in profit a year instead of 70, they could lower the cost of their services to consumers (which would happen naturally if there was adequate competition) and pay their employees much higher wages than they currently get paid. While still having VERY healthy profit levels.

What is so bad about that?

 

[JMapleton]

Cuda, what you and other liberals fail to understand is once you begin to label amounts as excessive or obscene, you set a precedent which allows the general population to loot resources from other citizens.

Do you really want to live in a society that can dictate what is and isn't considered "too much?"

One day that precedent may reach back onto you, when someone decides you have "too much."

 

[momeNt]

I can't give you an exact definition, but I can provide an example.

http://finance.yahoo.com/q/ks?s=VZ+Key+Statistics

Verizon, 70 billion in profits with 112 billion in revenue over the last 12 months. This for a company with 178,000 employees, which represents a profit of around $400,000 per employee. Exclude the top 1% of that company. What do you think the average salary of an employee is there? $60,000? I wish I had these numbers, Im genuinely curious to know.

That is obscene profits. These profits are most certainly not shared with their employees. This is a company that is known for having atrocious customer service, overpriced service and obviously low payed employees. Yet they are an industry leader because our 'free market' is completely broken.

If Verizon made 35 billion in profit a year instead of 70, they could lower the cost of their services to consumers (which would happen naturally if there was adequate competition) and pay their employees much higher wages than they currently get paid. While still having VERY healthy profit levels.

What is so bad about that?

Gross profits is just Revnue - Cost of goods sold, there are a lot of other expenses before you get to net income. Which is around 4b. They are the best performing communications company though with profit margins at 1.84% though.

If their gross profits were $35b they'd be out of business posting a 30b loss on the year.

 

[Atreus21]

I can't give you an exact definition, but I can provide an example.

http://finance.yahoo.com/q/ks?s=VZ+Key+Statistics

Verizon, 70 billion in profits with 112 billion in revenue over the last 12 months. This for a company with 178,000 employees, which represents a profit of around $400,000 per employee. Exclude the top 1% of that company. What do you think the average salary of an employee is there? $60,000? I wish I had these numbers, Im genuinely curious to know.

That is obscene profits. These profits are most certainly not shared with their employees. This is a company that is known for having atrocious customer service, overpriced service and obviously low payed employees. Yet they are an industry leader because our 'free market' is completely broken.

If Verizon made 35 billion in profit a year instead of 70, they could lower the cost of their services to consumers (which would happen naturally if there was adequate competition) and pay their employees much higher wages than they currently get paid. While still having VERY healthy profit levels.

What is so bad about that?

How is Verizon still in business? Do they steal the money they make? Or do people voluntarily give it to them?

 

[himkhan]

Cuda, what you and other liberals fail to understand is once you begin to label amounts as excessive or obscene, you set a precedent which allows the general population to loot resources from other citizens.

Do you really want to live in a society that can dictate what is and isn't considered "too much?"

One day that precedent may reach back onto you, when someone decides you have "too much."

Perhaps a maximum wage is in order then. So those who have not don't feel so distant from the those who have so much. I make what most would say great money but not even close to the obscene amounts Americans pay their sports stars.

 

[bshole]

Their net income this year was 875 million, down big time from 2.4 billion last year.

http://finance.yahoo.com/q/is?s=vz+Income+Statement&annual

 

[Atreus21]

Perhaps a maximum wage is in order then. So those who have not don't feel so distant from the those who have so much. I make what most would say great money but not even close to the obscene amounts Americans pay their sports stars.

Why not just raise the minimum wage to $40/hr and set the maximum wage at the same rate?

 

[BUnit1701]

I can't give you an exact definition, but I can provide an example.

http://finance.yahoo.com/q/ks?s=VZ+Key+Statistics

Verizon, 70 billion in profits with 112 billion in revenue over the last 12 months. This for a company with 178,000 employees, which represents a profit of around $400,000 per employee. Exclude the top 1% of that company. What do you think the average salary of an employee is there? $60,000? I wish I had these numbers, Im genuinely curious to know.

That is obscene profits. These profits are most certainly not shared with their employees. This is a company that is known for having atrocious customer service, overpriced service and obviously low payed employees. Yet they are an industry leader because our 'free market' is completely broken.

If Verizon made 35 billion in profit a year instead of 70, they could lower the cost of their services to consumers (which would happen naturally if there was adequate competition) and pay their employees much higher wages than they currently get paid. While still having VERY healthy profit levels.

What is so bad about that?

Wrong. They are an indusry leader because they provide the best product, in terms of speed, reliability, and overall coverage. Not one person in the US is forced to purchase their cell phone coverage from Verizon.

 

[JMapleton]

Perhaps a maximum wage is in order then. So those who have not don't feel so distant from the those who have so much. I make what most would say great money but not even close to the obscene amounts Americans pay their sports stars.

Until someone decides you have "too much."