Rich people across the Western world are anxiously watching France, where president Francois Hollande is vowing to raise the top tax rate—on earnings over $1.2 million a year—to 75 percent. Tres bien, Mr. Hollande. The problem with this otherwise fine idea is that the very rich can simply pack up and move to a more accommodating Western nation with lower taxes and less concern for income inequality, like America. There is, though, a more elegant solution to this: a maximum income.
Let's have a maximum annual income of, oh, $5 million, pegged to inflation. All income above that would be taxed at 99 percent. Our precious national sports stars, celebrities, and corporate executives could still be fabulously wealthy. The daydreaming poor could still have a nice big number about which to hopelessly dream. Five million dollars a year. Five million! Anyone with $5 million can invest it conservatively enough to earn 5 percent a year and still be making $250K per year without lifting a finger. In other words, $5 million provides you with the means to live as a member of the one percent without ever touching the principal. It's everything that any reasonable person could ask for, financially speaking.
A million and a quarter per year? Far more than anyone should be earning, in a world with so much poverty and want, but not so much that someone could consider themselves set for life. It's a number at which the go-getting rich person is still aspirational. They hope to double or triple that salary before their earning days are done. So a hefty 75 percent tax, though completely just, will not only spook them enough to flee, but allow them to retain a modicum of dignity while doing so, at least among the more affluent segments of their peer group.
But $5 million? I defy the slickest PR firm in America to explain to a nation of struggling, underemployed working class people with a median household income of just over $50,000 why an already-wealthy person felt the need to leave the country—taking money out of the taxpayers' pockets in a very literal sense—rather than donate, to the common good, earnings over one hundred times the nation's median household income. This requires an already-wealthy person who is, by definition, being paid a wage that far outstrips any measure of fairness or good sense, to stand up in front of a nation (to which he has no doubt paid ample lip service during his rise to the top) of people far, far less fortunate than he and declare: "I have far more than I need. But I would rather abandon you all than help you."
If someone is willing to do that, let them take their shame and go. Good riddance.
America has provided all of the opportunity necessary for these people to earn their fortunes. That opportunity is paid for with tax dollars. The wealthy could still earn as much as they want. It's not that they don't get anything for their earnings above $5 million; they get the distinct privilege of making a huge and helpful contribution to their fellow countrymen. Give them awards. Lavish them with praise. Publish the names of the highest taxpayers in laudatory newspaper columns. Allow them to bask in civic pride. But take their money. They have plenty.
A progressive tax rate that rises to 75 percent and above is perfectly ethical and just policy (and it has historical precedent, right here in America), but one that's politically difficult. It's open to being twisted for political gain. People don't understand its details, and are susceptible to scaremongering. It allows the self-interested rich to cloak their own self-serving motives in bombastic pseudo-populist rhetoric. A maximum income suffers these flaws far less. It is easy to understand. It provides a very clear (and high) line at which the average American can gaze up, and contemplate just how far away someone is who might exceed it. And it puts into stark relief the fact that there is no good argument as to why anyone needs more than that, while others are suffering in poverty. A $5 million per year ceiling is, if anything, too generous. But we can always crank it down later.
This is not primarily about raising our total national tax revenue. That's a far broader issue. This is about inequality. It's about what type of nation we want to be—what level of inequality we are willing to tolerate in order to protect a vague and twisted notion of "freedom" that most people cannot even fully articulate, and that was created by the rich to serve themselves. This is a baby step. But it's one that would make us, fundamentally, a better and more just country.
And if the rich people don't like it, fine. We can just tie executive pay to worker pay, and it will be a moot point.