WhatFinger


Some people need a dictionary.

Someone explain to the left: You’re not ‘subsidizing’ a business when they earn money and you don’t



Lefty types are going all in this morning sharing a piece from Salon that claims taxpayers are "subsidizing" generous executive compensation at big corporations. It's written by former Clinton Secretary of Labor Robert Reich, who demonstrates that like most of the left these days, he doesn't know what a subsidy is:
Almost everyone knows CEO pay is out of control. It surged 16 percent at big companies last year, and the typical CEO raked in $15.1 million, according to the New York Times. Meanwhile, the median wage continued to drop, adjusted for inflation. What's less well-known is that you and I and other taxpayers are subsidizing this sky-high executive compensation. That's because corporations deduct it from their income taxes, causing the rest of us to pay more in taxes to make up the difference.

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This tax subsidy to corporate executives from the rest of us ought to be one of the first tax expenditures to go, when and if Congress turns to reforming the tax code. We almost got there 20 years ago. When he was campaigning for the presidency, Bill Clinton promised that if elected he'd end the deductibility of executive pay in excess of $1 million. Once in office, though, his economic advisers urged him to modify his pledge to allow corporations to deduct executive pay in excess of $1 million if the pay was linked to corporate performance -- that is, to the value of the company's shares. (I hate to sound like a told-you-so, but I was the one adviser who wanted the new president to stick to his campaign promise without creating the pay-for-performance loophole.)
Now we've already dealt with the blubbering Times piece about CEO pay being "out of control," and right there you encounter the first conceit of the left, which is that someone (presumably from among their ranks) should be "controlling" the compensation agreements freely entered into between private parties. If Company A wants to pay Executive B $500 million a year, that has nothing to do with Liberal C or Congressman D. Ah, but they think it does, because if the tax code did not allow companies to deduct that expense, they would be paying it in taxes. Ergo, the absence of taxation on the income spent to pay the executive is a "subsidy." No. It's not. A subsidy is when money from the taxpayers is actually given to a company to prop up an operation that cannot earn enough money to sustain itself. (See: Farms, Wind; or Solyndra; or Volt, Chevy). A company that pays a hefty paycheck to its CEO does so with revenue it earned. The deduction of that expense is not extraordinary at all, since the tax code says businesses have to pay taxes on net earnings after business expenses are deducted. And compensation is a business expense. What it comes down to is that businesses pay taxes on their profits, not on gross revenues. If you think a decision to pay big bucks to a CEO is foolish - maybe you're right, maybe you're wrong - but remember that Uncle Sam only gets a smaller check because the company turns a smaller profit. So if your top concern is really that the government gets every last cent that it can, you should understand that this company doesn't shortchange the government until it first shortchanges itself. Either way, taxpayers aren't subsidizing anything. Companies go out and make sales, then decide how much of what they earn to spend running the business, then pay a portion of the rest in taxes. None of the CEO's pay came from anything you produced or earned. This is not how the left looks at it at all, of course. They think the government really has first dibs on every dollar floating around out there, and only by their good graces is anyone allowed to keep anything they went out and worked for. They can think of no conceivable reason the government should not tell companies what is "reasonable" to pay anyone, setting that as the limit of what can be deducted as an expense. But I will be happy to throw the left a bone. If they really don't like executive pay being tax-deductible, there is a proposal to replace the current tax code that they should support. It's the boss's 9-9-9 plan! It would tax all business receipts minus purchases from other businesses. Compensation would not be deductible at all. It's all explained in a pretty awesome book for which I had the honor of serving as editor. If liberals really think such tax deductions are "subsidies," they should support a simplified tax code that eliminates such deductions - accepting a code whose goal is simply to raise revenue without trying to manipulate the spending and investment decisions of businesses and individuals, since they can make those decisions for themselves much better than politicians can make them for them. But it's not really about that for them. They see the tax code as a means of manipulating and controlling the economic behavior or businesses and ordinary citizens, and they will fight like crazy against any attempt to truly simplify it for that reason. They really do think that money earned by Company A and paid to Executive B is theirs, and they're getting screwed when they don't get the opportunity to take it. I would suggest we buy them a dictionary so they can understand the true meaning of the word "subsidy," but people cannot understand what they don't want to understand.


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Dan Calabrese’s column is distributed by HermanCain.com, which can be found at HermanCain

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