Netflix CEO: "Please Raise My Taxes."
03-04-2009, 04:09 PM
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Netflix CEO: "Please Raise My Taxes."
From an op-ed in the New York Times:
Thoughts?
Please Raise My Taxes
By REED HASTINGS
Published: February 5, 2009
Los Gatos, Calif.
I’M the chief executive of a publicly traded company and, like my peers, I’m very highly paid. The difference between salaries like mine and those of average Americans creates a lot of tension, and I’d like to offer a suggestion. President Obama should celebrate our success, rather than trying to shame us or cap our pay. But he should also take half of our huge earnings in taxes, instead of the current one-third.
Then, the next time a chief executive earns an eye-popping amount of money, we can cheer that half of it is going to pay for our soldiers, schools and security. Higher taxes on huge pay days can finance opportunity for the next generation of Americans.
Clearly, the efforts over the past few decades to control executive compensation haven’t accomplished much. Improved public disclosure was supposed to shame companies into lowering salaries, and it obviously hasn’t worked. In 1993, President Bill Clinton changed the tax law to effectively cap executives’ salaries at $1 million a year, but that simply drove corporate boards to offer larger bonuses and stock options to attract and keep talent. More recently, “say on pay” proposals would have shareholders opine on their boards’ compensation decisions, but “say and pay” won’t change the fact that luring a top executive away from another company is never easy or cheap.
The reality is that the boards of public companies hate overpaying for anything, including executives. But picking the wrong chief executive is an enormous disaster, so boards are willing to pay an arm and a leg for already proven talent. Putting limits on the salaries at public companies, or trying to shame them into coming down, won’t stop this costly competition for talent.
Of course, it’s galling when a chief executive fails and is still handsomely rewarded. But with the concept of “tax, not shame,” a shocking $20 million severance package would generate $10 million for the government. That’s a far better solution than what we have today, not least because it works with the market rather than against it.
Another advantage is that it would also cover the sometimes huge earnings of hedge fund managers, star athletes, stunning movie stars, venture capitalists and the chief executives of private companies. Surely there is no reason to focus only on executives at publicly traded companies.
This week, President Obama proposed imposing a $500,000 compensation cap on companies seeking a bailout. It’s a terrible idea. We all want the taxpayers’ money returned, and capping compensation at bailout recipients will just make it that much harder for those boards to hire and hold on to the executives who can lead their companies to compete and thrive.
Perhaps a starting place for “tax, not shame” would be creating a top federal marginal tax rate of 50 percent on all income above $1 million per year. Some will tell you that would reduce the incentive to earn but I don’t see that as likely. Besides, half of a giant compensation package is still pretty huge, and most of our motivation is the sheer challenge of the job anyway.
Instead of trying to shame companies and executives, the president should take advantage of our success by using our outsized earnings to pay for the needs of our nation.
Reed Hastings is the chief executive of Netflix.
By REED HASTINGS
Published: February 5, 2009
Los Gatos, Calif.
I’M the chief executive of a publicly traded company and, like my peers, I’m very highly paid. The difference between salaries like mine and those of average Americans creates a lot of tension, and I’d like to offer a suggestion. President Obama should celebrate our success, rather than trying to shame us or cap our pay. But he should also take half of our huge earnings in taxes, instead of the current one-third.
Then, the next time a chief executive earns an eye-popping amount of money, we can cheer that half of it is going to pay for our soldiers, schools and security. Higher taxes on huge pay days can finance opportunity for the next generation of Americans.
Clearly, the efforts over the past few decades to control executive compensation haven’t accomplished much. Improved public disclosure was supposed to shame companies into lowering salaries, and it obviously hasn’t worked. In 1993, President Bill Clinton changed the tax law to effectively cap executives’ salaries at $1 million a year, but that simply drove corporate boards to offer larger bonuses and stock options to attract and keep talent. More recently, “say on pay” proposals would have shareholders opine on their boards’ compensation decisions, but “say and pay” won’t change the fact that luring a top executive away from another company is never easy or cheap.
The reality is that the boards of public companies hate overpaying for anything, including executives. But picking the wrong chief executive is an enormous disaster, so boards are willing to pay an arm and a leg for already proven talent. Putting limits on the salaries at public companies, or trying to shame them into coming down, won’t stop this costly competition for talent.
Of course, it’s galling when a chief executive fails and is still handsomely rewarded. But with the concept of “tax, not shame,” a shocking $20 million severance package would generate $10 million for the government. That’s a far better solution than what we have today, not least because it works with the market rather than against it.
Another advantage is that it would also cover the sometimes huge earnings of hedge fund managers, star athletes, stunning movie stars, venture capitalists and the chief executives of private companies. Surely there is no reason to focus only on executives at publicly traded companies.
This week, President Obama proposed imposing a $500,000 compensation cap on companies seeking a bailout. It’s a terrible idea. We all want the taxpayers’ money returned, and capping compensation at bailout recipients will just make it that much harder for those boards to hire and hold on to the executives who can lead their companies to compete and thrive.
Perhaps a starting place for “tax, not shame” would be creating a top federal marginal tax rate of 50 percent on all income above $1 million per year. Some will tell you that would reduce the incentive to earn but I don’t see that as likely. Besides, half of a giant compensation package is still pretty huge, and most of our motivation is the sheer challenge of the job anyway.
Instead of trying to shame companies and executives, the president should take advantage of our success by using our outsized earnings to pay for the needs of our nation.
Reed Hastings is the chief executive of Netflix.
03-04-2009, 04:24 PM
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My Thoughts:
If the Fed could streamline there operations and cut off most of the necessary programs/projects, this wouldn't be necessary. But that would be too much to ask for whatever reason.
I think the fed has long lost the concept of being public servants. We hired them. If they can't figure out how to make due with the money that We pay them, we should hire someone else who can. Government should be able to take a pay raise (tax increase) whenever they decide. It should be the people's decision and tax increases shouldn't be allowed without 66% vote from the people.
That being said, the staggering deficit still exists and should be eradicated within a reasonable amount of time. Knowing that the fed will not cut a majority of it's useless programs, we've come to expect tax increases as the primary tactic to balance the budget. While not being an acceptable solution, the only way to change it is to replace the elected officials.
If the Fed could streamline there operations and cut off most of the necessary programs/projects, this wouldn't be necessary. But that would be too much to ask for whatever reason.
I think the fed has long lost the concept of being public servants. We hired them. If they can't figure out how to make due with the money that We pay them, we should hire someone else who can. Government should be able to take a pay raise (tax increase) whenever they decide. It should be the people's decision and tax increases shouldn't be allowed without 66% vote from the people.
That being said, the staggering deficit still exists and should be eradicated within a reasonable amount of time. Knowing that the fed will not cut a majority of it's useless programs, we've come to expect tax increases as the primary tactic to balance the budget. While not being an acceptable solution, the only way to change it is to replace the elected officials.
03-04-2009, 04:30 PM
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Pretty much what I've been suggesting for over a year now, anybody that makes this kind of money can afford being taxed at 50% and considering this government's various protections are a good part of why they are able to get that kind of salary in the first place, they should be able to help pay their share back.
And "the Fed" and "the Federal government" are two seperate and distinct entities, the Federal reserve is actually a privately owned bank that issues our fiat currency, the federal government is the entity that sets tax rates and runs up national debt.
And "the Fed" and "the Federal government" are two seperate and distinct entities, the Federal reserve is actually a privately owned bank that issues our fiat currency, the federal government is the entity that sets tax rates and runs up national debt.
Last edited by psoper; 03-04-2009 at 04:32 PM.
03-04-2009, 07:49 PM
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Because that's somehow unfair to teh poor. Which I understand their taxes will likely increase, but it's technically much more fair than a progressive tax.
I really don't see any other reason why this can't be implemented other than having Larry the Janitor move into a smaller studio apartment.
I really don't see any other reason why this can't be implemented other than having Larry the Janitor move into a smaller studio apartment.
03-04-2009, 08:53 PM
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Because that's somehow unfair to teh poor. Which I understand their taxes will likely increase, but it's technically much more fair than a progressive tax.
I really don't see any other reason why this can't be implemented other than having Larry the Janitor move into a smaller studio apartment.
I really don't see any other reason why this can't be implemented other than having Larry the Janitor move into a smaller studio apartment.
example: single mom making minimum wage with 3 kids. she gets $3k in child credits, child care credits, 3x $3500 in standard deductions on top of her own, and earned income tax credit (EIC). this woman would stand to get more back from the federal government than she actually paid in.
03-04-2009, 09:34 PM
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but the "poor" truly don't pay any taxes. in some cases, they can get more money back than they pay in. this is redistribution of wealth.
example: single mom making minimum wage with 3 kids. she gets $3k in child credits, child care credits, 3x $3500 in standard deductions on top of her own, and earned income tax credit (EIC). this woman would stand to get more back from the federal government than she actually paid in.
example: single mom making minimum wage with 3 kids. she gets $3k in child credits, child care credits, 3x $3500 in standard deductions on top of her own, and earned income tax credit (EIC). this woman would stand to get more back from the federal government than she actually paid in.
But the single people w/o dependents would scream bloody murder if we raised their very small 15% tax even the slightest bit in the name of fairness and simplicity.
03-04-2009, 09:46 PM
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That's because they're poor. A similar standard would be implemented in a flat tax program, but instead of deductions, a family of say 4 people wouldn't get taxed until a combined household income of something like $30K annual. Just pulling numbers outta my butt, but the same concept would be applied.
But the single people w/o dependents would scream bloody murder if we raised their very small 15% tax even the slightest bit in the name of fairness and simplicity.
But the single people w/o dependents would scream bloody murder if we raised their very small 15% tax even the slightest bit in the name of fairness and simplicity.
03-05-2009, 08:03 AM
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At some point it becomes counter productive to tax people who make very little money. Sort of like a bank penalty for not having enough money in their savings account.
People that make a living wage in take home pay should be able to pay the same percentage of income tax as the top executives at billion dollar corporations.
03-05-2009, 08:17 AM
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Because that's somehow unfair to teh poor. Which I understand their taxes will likely increase, but it's technically much more fair than a progressive tax.
I really don't see any other reason why this can't be implemented other than having Larry the Janitor move into a smaller studio apartment.
I really don't see any other reason why this can't be implemented other than having Larry the Janitor move into a smaller studio apartment.
Or maybe Larry the janitor has a kid. He barely makes rent in a middle class neighborhood with a quality schools, a relatively low crime rate, and a strong sense of community. His taxes go up. Now, he can no longer afford to live in the middle class neighborhood. He now has to move to a more impoverished neighborhood with his kid, meaning his kid can no longer attend the quality local school. In this new neighborhood, the crime rate is higher and there is a strong gang presence. Now his kid is dealing crack and the educational opportunity he once had have gone out the window.
Compare this to Joe the CEO. Joe's taxes go up from 36% to 39% on the $500k he makes a year. He can no longer afford to buy his daughter Betsy a new BMW. Bummer.
From a quality of life standpoint, I hardly think it is "fair" to raise Larry's taxes. I realize that a "fair tax" scheme would give money back to the poorest of Americans. However, I am not convinced that such a scheme would not have major effects on some of the borderline poor in America.
03-05-2009, 08:19 AM
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But the problem is that quite often there is no smaller studio apartment for Larry the Janitor. Larry may be making just enough to afford the smallest studio apartment available. Where is he going to go when his taxes go up?
Or maybe Larry the janitor has a kid. He barely makes rent in a middle class neighborhood with a quality schools, a relatively low crime rate, and a strong sense of community. His taxes go up. Now, he can no longer afford to live in the middle class neighborhood. He now has to move to a more impoverished neighborhood with his kid, meaning his kid can no longer attend the quality local school. In this new neighborhood, the crime rate is higher and there is a strong gang presence. Now his kid is dealing crack and the educational opportunity he once had have gone out the window.
Compare this to Joe the CEO. Joe's taxes go up from 36% to 39% on the $500k he makes a year. He can no longer afford to buy his daughter Betsy a new BMW. Bummer.
From a quality of life standpoint, I hardly think it is "fair" to raise Larry's taxes. I realize that a "fair tax" scheme would give money back to the poorest of Americans. However, I am not convinced that such a scheme would not have major effects on some of the borderline poor in America.
Or maybe Larry the janitor has a kid. He barely makes rent in a middle class neighborhood with a quality schools, a relatively low crime rate, and a strong sense of community. His taxes go up. Now, he can no longer afford to live in the middle class neighborhood. He now has to move to a more impoverished neighborhood with his kid, meaning his kid can no longer attend the quality local school. In this new neighborhood, the crime rate is higher and there is a strong gang presence. Now his kid is dealing crack and the educational opportunity he once had have gone out the window.
Compare this to Joe the CEO. Joe's taxes go up from 36% to 39% on the $500k he makes a year. He can no longer afford to buy his daughter Betsy a new BMW. Bummer.
From a quality of life standpoint, I hardly think it is "fair" to raise Larry's taxes. I realize that a "fair tax" scheme would give money back to the poorest of Americans. However, I am not convinced that such a scheme would not have major effects on some of the borderline poor in America.
Why do I have to pay for someone that made wrong choices?
03-05-2009, 09:12 AM
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If we all started on a level playing field I would agree with you. If all our schools were filled with quality teachers, every child provided with basic health care services, and if racism and sexism did not exist then we could accurately infer that someone who is without a job and without a place to live somehow ****ed up. However, we do not live in that kind of world. Most people who live in poverty don't have access to quality schools or health care. Parents have to work two jobs just to make rent. When this happens, it is much harder to look after the kids, and the likelihood they will join gangs or get into drugs increases drastically. Poverty is a vicious cycle.
I am someone who most likely stands to lose in the future under Obama's tax plan. But I am going to be a-okay. I will still be able to pay my mortgage, pay the bills, and live a life where I don't really have to worry about money. My quality of life is only marginally going to be affected by the new tax codes. Compare this to a flat tax system where I would see huge benefits. Yeah, it would be great. I could save more, maybe take another trip to Europe every year. But morally, I would not be okay with it. The benefit to me is not worth the loss to thousands of other people who would be hard hit under a flat tax system. I could not have that on my conscience.
03-05-2009, 09:51 AM
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Not everyone who is poor made the wrong choices. There are a lot of people who are forced into poverty due because things happen that they cannot control.
If we all started on a level playing field I would agree with you. If all our schools were filled with quality teachers, every child provided with basic health care services, and if racism and sexism did not exist then we could accurately infer that someone who is without a job and without a place to live somehow ****ed up. However, we do not live in that kind of world. Most people who live in poverty don't have access to quality schools or health care. Parents have to work two jobs just to make rent. When this happens, it is much harder to look after the kids, and the likelihood they will join gangs or get into drugs increases drastically. Poverty is a vicious cycle.
I am someone who most likely stands to lose in the future under Obama's tax plan. But I am going to be a-okay. I will still be able to pay my mortgage, pay the bills, and live a life where I don't really have to worry about money. My quality of life is only marginally going to be affected by the new tax codes. Compare this to a flat tax system where I would see huge benefits. Yeah, it would be great. I could save more, maybe take another trip to Europe every year. But morally, I would not be okay with it. The benefit to me is not worth the loss to thousands of other people who would be hard hit under a flat tax system. I could not have that on my conscience.
If we all started on a level playing field I would agree with you. If all our schools were filled with quality teachers, every child provided with basic health care services, and if racism and sexism did not exist then we could accurately infer that someone who is without a job and without a place to live somehow ****ed up. However, we do not live in that kind of world. Most people who live in poverty don't have access to quality schools or health care. Parents have to work two jobs just to make rent. When this happens, it is much harder to look after the kids, and the likelihood they will join gangs or get into drugs increases drastically. Poverty is a vicious cycle.
I am someone who most likely stands to lose in the future under Obama's tax plan. But I am going to be a-okay. I will still be able to pay my mortgage, pay the bills, and live a life where I don't really have to worry about money. My quality of life is only marginally going to be affected by the new tax codes. Compare this to a flat tax system where I would see huge benefits. Yeah, it would be great. I could save more, maybe take another trip to Europe every year. But morally, I would not be okay with it. The benefit to me is not worth the loss to thousands of other people who would be hard hit under a flat tax system. I could not have that on my conscience.
The "poor me" argument holds not water.
You want a better life?
Work for it.
It really is that simple.
