For years we have been discussing income inequality. However, we are taking the wrong approach.
Yes, trickle down economics CAN actually work, if handled properly. It has NEVER been handled properly and is not intended to work as promoted.
On income inequality, the common argument is that it will cause inflation, increased prices, etc. While there is some minor validity to this, that is minor. But I am not going to analyze that issue here.
Instead, the most effective route to achieving greater income parity is not to increase the income at the bottom. The best and most effective approach is limiting income at the top.
I am referring to establishing a maximum income. Not a maximum wage, but income.
This is not inferring anything should be taken away from anyone that they already possess. It would not limit your possessions that you could retain which you have or may purchase with your income. It refers specifically to taxing future income from all sources. This is not suggesting any ridiculously small number. I am suggesting a maximum income of something like $500 million a year from all sources.
No, that does not mean a lifetime limit. That means PER YEAR. If you need more than $500 million per year to live on, there is truly something wrong with you.
Yes, that income would also be taxed with an incremental tax system. If you do not understand incremental taxes, look it up. The rich (and willfully ignorant) like to claim that people at that income level are taxed at (for example) 40%. When you look at how incremental taxes work, the truth is that the real number is closer to 20% or less.
Yes, I know. That would leave them with ONLY $400 million per year to live on. The struggle is real. Oh, the horror.
When we talk about a maximum wage, that would include stock packages, free insurance, corporate paid vacations at resorts, stock dividends. Anything that adds to your income and benefits would count as actual income for tax purposes.
Of course, anything above the established maximum would be taxed at 100%.
On the corporate side, we should be limiting corporate profits at a percentage. For example, a 20% cap on corporate profits after expenses. Once again from all sources. Because it would be set at a percentage, if a corporation makes $1 billion a year profits, if they want more it means they have to produce more. That means more production, creating more jobs, more sales.
The effect of more jobs existing than workers to fill them would be increased wages as companies try and attract workers. That would mean they would also spend more money on benefits for workers, such as better insurance, etc.
And that is how trickle down economics could actually work. It is not how it is happening now because there is no limit on profits. Companies increase profits by eliminating jobs, decreasing wages and benefits while performing stock buy-backs to increase their stock value (then there are fewer and fewer absolute stocks available, held by fewer and fewer people).
The additional effect is that it would stabilize the stock market. Fewer radical highs and lows because there would be no benefit to massive buying and selling. No stock price increases as companies announce layoffs. The only way a stock would increase in value would be by increasing sales and production, meaning more jobs being created instead of eliminated.
There is no question this entire idea will be attacked by those who say it cannot happen. Keep in mind that ALL grass roots movements begin this way. It starts with an idea, spread among people. Past grass roots movements have been the female vote, desegregation, domestic violence. Take the last one. It took years to convince people that it was bad for men to beat their wives and children. In fact, it was sometimes expected. How long did it take to gain legislation on that?
Those past movements took long periods because of the times in which they happened. Today we have the advantage of the internet. Social media in many forms. We share ideas in milliseconds across vast distances and millions of people. Yet it still begins with us. We cannot wait for a hero. I have said many times and will keep saying it: We are our own heroes. Let’s act like it. Defeatism has no purpose.