A Maximum Wage

[Tex_21]

What a load of rubbish! A fair tax system will not have mcdonalds workers paying for other people's uni degrees.

At which point would you have the tax free threshold phase out under a "fair tax system"? Currently, it's just under $20k, which means unskilled workers, such as those at McDonalds, or checkouts or wherever, are paying taxes. Little back of the envelope calculation - Now, if that were lifted to a higher level, say $50k, with the median wage (the average is over $65, but taking the average is a bad move, it's skewed by mining industry wages and those paid to the very top) in Australia a little over $50k, we'll be conservative and say 45% of the labour force no longer pays tax. In a labour force of 12 million (again, slightly conservative, the real number is a little higher), that means 5.4 million workers no longer pay tax. Cool, but what does this mean for revenue? Assuming a normal distribution, the band from $20k-$50k would contain most of those 5.4m workers, let's say about 3.5m as an estimate. If 800,000 earn 20-30k, and pay on average about $2,500 in tax, 1.2m earn $30k-40k, paying around $6500 in average, and those left (1.5m) pay around $7500 on average, the loss in tax revenue amounts to over $21bn in lost revenue. Not huge in a budget approaching $400bn in nominal terms, but enough. Now, to make this shortfall up, I guess you would advocate higher MTRs at higher incomes (ignoring RJ's suggestion of a 100% tax rate above a certain threshold, as he has admitted it is not realistic. On topic, check out the Laffer curve, very relevant to the discussion), which seems reasonable enough. However what needs to be taken into account is these will have some detrimental effect on economic activity, and the question is how much?

The trick is, even if you implement these changes, higher taxes flow through to higher prices as well, meaning everyone pays indirectly. Free university education is regressive, that's simply the nature of it.

If the storm troopers for the rich would look at the situation with open eyes they would see the benefits of the wealth tax the OP is endorsing. I'm not talking about people on 6 figures per year, i'm talking about 7 - 10 figures.

RJ has admitted it is fanciful, and I'm certainly no "stormtrooper for the rich", I'm just an economist, I presented an option earlier if you want to do some form of 'soaking the rich' to generate revenue, better than implementing price controls (which it would amount to), which have never worked anyway for a sustained period of time.

 

[The Passenger]

not entirely buying that because if tax rates are's staggered which we currently have, then it's the rich who are doing much more to subsidise universities.

doing the math, in a very simplistic method. it's more complex than this i know but i can't be ****ed this morning:

in 03-04 we collected 250 billion in taxes in australia. (http://members.iimetro.com.au/~hubbca/tax.htm - hardly an indisputable a source i know, but it would be close enough to right)

average undergraduate fees per year $24,000 http://www.studyinaustralia.gov.au/en/Study-Costs/Fees/Tuition-fees (this is for international students but doesn't matter, the higher figure less supports my point)

number of university students in australia 480,000 http://ministers.deewr.gov.au/evans/record-number-australian-students-university

~11 billion dollars in uni fees to subsidise per year (around 5% of overall tax collected)

a person earning 30,000 a year pays 3,600 in taxes (probably closer to 1,000 when you throw in low income offsets), 5% of 3,600 is $180 a year for a low income earner contributing towards uni. even over a 50 year working career they contribute 8k but had the opportunity to get 72k worth of university fee's.

a person earning 500,000 a year pays 200,000 in taxes (198 to be exact), 5% is 10k per year of that which goes towards university education. over a 50 year work career (obv not always earning 500k but once again, can't be ****ed) they contribute 500k to university fee's and only get 72k out of it.

the biggest issue is what to do with low income earners who are migrants who never got the opportunity. maybe give all migrants 3 years subsidised uni on gaining citizenship? or just allow them tax offsets.

with free university every person has the opportunity to get to university and build a future for themselves. if some people choose not to do that, or do it then don't take advantage of having a degree than that is their choice.

in any case, the system we have is very good and better. there is still very little up front fee's, and not having to pay anything till your earn ~45k (and even then it's a fairly insignificant amount out of your weekly pay cheque) is a pretty good deal. by that stage you should be afford the little bit extra week out of your pocket.

The biggest driving force behind the Celtic Tiger was debt, and lax lending..

true, and ultimately the killer of it too. but a highly skilled workforce helped.

 

[Tex_21]

not entirely buying that because if tax rates are's staggered which we currently have, then it's the rich who are doing much more to subsidise universities.

doing the math, in a very simplistic method. it's more complex than this i know but i can't be screwed this morning:

in 03-04 we collected 250 billion in taxes in australia. (http://members.iimetro.com.au/~hubbca/tax.htm - hardly an indisputable a source i know, but it would be close enough to right)

average undergraduate fees per year $24,000 http://www.studyinaustralia.gov.au/en/Study-Costs/Fees/Tuition-fees (this is for international students but doesn't matter, the higher figure less supports my point)

number of university students in australia 480,000 http://ministers.deewr.gov.au/evans/record-number-australian-students-university

~11 billion dollars in uni fees to subsidise per year (around 5% of overall tax collected)

a person earning 30,000 a year pays 3,600 in taxes (probably closer to 1,000 when you throw in low income offsets), 5% of 3,600 is $180 a year for a low income earner contributing towards uni. even over a 50 year working career they contribute 8k but had the opportunity to get 72k worth of university fee's.

a person earning 500,000 a year pays 200,000 in taxes (198 to be exact), 5% is 10k per year of that which goes towards university education. over a 50 year work career (obv not always earning 500k but once again, can't be screwed) they contribute 500k to university fee's and only get 72k out of it.

the biggest issue is what to do with low income earners who are migrants who never got the opportunity. maybe give all migrants 3 years subsidised uni on gaining citizenship? or just allow them tax offsets.

with free university every person has the opportunity to get to university and build a future for themselves. if some people choose not to do that, or do it then don't take advantage of having a degree than that is their choice.

I don't disagree. The rich will pay more under any (realistic) tax system, by virtue of earning more, consuming more etc. Doesn't mean the poor do not pay for it.

i

n any case, the system we have is very good and better. there is still very little up front fee's, and not having to pay anything till your earn ~45k (and even then it's a fairly insignificant amount out of your weekly pay cheque) is a pretty good deal. by that stage you should be afford the little bit extra week out of your pocket.

I agree completely. I think we have a great system here, and that's why the HECS concept has been exported around the world.

 

[frantelle]

Yeah this would work. The only businesses that would be around would be little mum & pa corner shops

 

[volcboy]

Yeah this would work. The only businesses that would be around would be little mum & pa corner shops

Would a fragmentation of power and income within the business system towards more small businesses, more localised control/income dispersion, more competition and less mono/duopolistic practices really be such a bad thing?

 

[frantelle]

Would a fragmentation of power and income within the business system towards more small businesses, more localised control/income dispersion, more competition and less mono/duopolistic practices really be such a bad thing?

Probably. You'll still have people seeking to get above everyone else, the only way to do it in a "Max wage" environment would be crime

 

[Caesar]

Would a fragmentation of power and income within the business system towards more small businesses, more localised control/income dispersion, more competition and less mono/duopolistic practices really be such a bad thing?

Most of the benefits of industrialised society aren't possible without some method of aggregating and concentrating significant capital. I don't imagine many people would be in favour of more small businesses if it was a byproduct of reverting to an agrarian economy.

 

[LouisCK]

HOng Kong has a 10% flat tax rate and last year the government made SO much money they gave every holder of a HK id card the equivalent of $1000 each due to the surplus. Tax people less and they dont mind paying it, and it gives business incentive to take risks and create jobs.

Have u been to HK? The place is a shithole.

 

[volcboy]

Most of the benefits of industrialised society aren't possible without some method of aggregating and concentrating significant capital. I don't imagine many people would be in favour of more small businesses if it was a byproduct of reverting to an agrarian economy.

They tend to be called 'benefits', but are they really? Small, localised businesses tend to create a supply to cater to an existing demand, whereas large, centralised businesses create a supply and then the demand (through advertising, lack of choice/options etc.). It's the 'I'll give you what you want' vs. 'I'll tell you what you want' conundrum.

For example, Coles and Woolworths created a 'competition' over who could supply $1 per litre milk. But what I would rather is good quality, local milk where the farmer is paid a reasonable amount for their goods to allow them to look after their animals and land to a high level. By feeding on the lowest common denominator (in this case, simple greed), large corporations gauge as much money as possible for themselves at the expense of everything else (wages, environment, any other 'externality'). This duopoly creates the illusion of competition (upon which the free market is supposedly based) and creates a negative outcome for all except the corporation.

A local small business does not have the option of doing this - they have to answer to and cater for their customers directly, rather than the other way around.

If many people actually stopped, looked at and thought about what they were buying (and had the intelligence and insight to do so), they might think differently. Instead the majority of people go on believing that a Big Mac is the worlds greatest and best value burger, without actually stopping to look at it and see that it is overpriced rubbish (or some similar scenario).

 

[Howard Littlejohn]

it works extremely well in ireland. after sustained decades of investment in education, which included three free years of university education for everyone, it was seen as one of the driving forces behind the celtic tiger which resulted in a highly skilled workforce.

Ireland is perhaps not the greatest economy to point to at the present time, but there is something in that. As there is in the debt fuelling both the boom and the bust argument. The debt problems have not been limited to those with free university education though, or even what some like to term "socialist" Europe. The United States has hardly been free of the same problems.

Personally I'm in favour of making everything up to the first undergraduate degree taxpayer funded. That may be a TAFE diploma and a degree, or just a degree for those who straight to uni. There would need to be time limits and a limit on changing degrees, but these days a bachelors degree holds no more value than finishing year 12 did in the 1980s. Its a default minimum education requirement for a lot of jobs where it was a big bonus in the past.

That allows the poor to go to uni without wracking up six figure debts, which are frightening numbers if you come from a "hand-to-mouth" background and do keep people away. It also ensures the Whitlam era "professional student" doesn't re-occur.


As for the OP's suggestion, I do think its too much. In some ways I'm not against the idea of tying the top level salaries to a maximum of the lowest in an organisation. If the CEO gets a 20% bonus, why shouldn't the rest of the organisation get something. Without them, the CEO would have delivered nothing. On the other hand, philosophically I'm against that much government interference in private affairs.
There is no doubt the salaries, and bonuses and stock options, of the top tier are utterly obscene and very rarely, if ever, deserved. Seven and eight figure severance packages for failing are evidence enough that the boy's club at the top look after its own. But I'm not sure that regulation is any sort of cure for that sickness.

 

[The Passenger]

I don't disagree. The rich will pay more under any (realistic) tax system, by virtue of earning more, consuming more etc. Doesn't mean the poor do not pay for it.

they do pay for it, but as said if they take advantage of it, they are coming out a long way in front (in the simple example i used they get 72k worth of education for an 8k outlay over their working lives)...

if they choose not to take advantage of that and not go to uni, then they've no one to blame but themselves really.

you could possibly have some sort of offset for low income earners who never enrolled in uni. it's all tied to your tax file number so very hard to rort.

 

[The Passenger]

what i'd like to know if anyone at all can justify the bonuses that banks handed out in the US whilst getting government bail outs

****ing disgraceful that is. it's almost impossbile to think of the hide to do that - 'we've gone broke, need government money, what do we do with that money? hand out some bonuses'

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHURVoSUqpho

 

[Caesar]

They tend to be called 'benefits', but are they really? Small, localised businesses tend to create a supply to cater to an existing demand, whereas large, centralised businesses create a supply and then the demand (through advertising, lack of choice/options etc.). It's the 'I'll give you what you want' vs. 'I'll tell you what you want' conundrum.

That sort of ignores the key issue, being that small, localised businesses can't produce a lot of the goods and services that are considered fundamental to an industrialised society.

It is one thing to ask a small mum and dad corner store to take over the retail role of Woolies. It's another to ask them to develop and produce the next iPhone.

 

[Caesar]

what i'd like to know if anyone at all can justify the bonuses that banks handed out in the US whilst getting government bail outs

******* disgraceful that is. it's almost impossbile to think of the hide to do that - 'we've gone broke, need government money, what do we do with that money? hand out some bonuses'

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHURVoSUqpho

I can sort of understand it, partly because the phrase 'bonus' is a bit misleading in the sense that the word implies getting something extra, on top of what you normally earn. In actual fact a lot of salaries in industries like this (especially in the US) use the word 'bonus' to refer to a performance-based component of your regular salary.

It's a bit like if you work in sales and you receive a small base salary and 10% on whatever you sell. The base is always manifestly inadequate, but you and the company know that even in the worst years you are going to be able to make X sales, so those two combined is really your minimum earnings (which is reasonable). If your company suddenly turned around and told you that you'd have to settle for your base salary only, you'd feel pretty ripped off - because the whole reason your base salary was as low as it was in the first place is because there was always an expectation that you would be topping it up with commission.

It's sort of the same thing here. I'm not saying the amounts of the bonuses are appropriate (I have no idea) but the fact that a business going broke is paying bonuses to its staff is not quite as ridiculous as it seems on the face of it.

 

[The Passenger]

Caesar


http://www.nytimes.com/2009/07/31/business/31pay.html?_r=0

At Goldman Sachs, for example, bonuses of more than $1 million went to 953 traders and bankers, and Morgan Stanley awarded seven-figure bonuses to 428 employees. Even at weaker banks like Citigroup and Bank of America, million-dollar awards were distributed to hundreds of workers.

come on?

 

[Caesar]

But the thing is, you and I have no idea if it's appropriate without knowing what their contracts say.

A trader might have a contract saying "you will receive (minimal base) plus a bonus of X% of all gross profit on your trades". When the trader took the job, he would have known the bare minimum of profits he's personally capable of achieving on trades. It is, for all practical purposes, part of his base salary. If he is still hitting his personal KPIs he's perfectly and legally entitled to it. The performance of the company is entirely irrelevant.

Like I said, the problem stems from this idea that most of us have about a 'bonus' being something gratuitous and unnecessary.

 

[The Passenger]

If he is still hitting his personal KPIs he's perfectly and legally entitled to it.

If they're entiteld to it, then let them sue the bank for their money then. These traders are the reason America got into the mess it did. predatory lending, failed scheme after failed scheme etc,.

even fox news blew up about it

http://www.foxnews.com/story/2009/03/17/pecial-report-panel-on-outrage-over-aig-bonuses/

at least the goldman sachs bloke gave up his bonus after earning 50 mil the year before.

 

[Caesar]

If they're entiteld to it, then let them sue the bank for their money then. These traders are the reason America got into the mess it did. predatory lending, failed scheme after failed scheme etc,.

What, traders are baddies so let's illegally deny them their employee entitlements? Come on.

I agree this shows that there are problems with the remuneration structure of the industry. But what we're looking at now is mostly a function of the market conditions prior to the crash. Good traders were in high demand. They required big salaries, and they required a significant component of that to be linked to personal performance.

The media has been shocking in this. Stories like the ones you've quoted are deliberately designed to focus on "hurr durr, opportunistic rich guys in suits giving away public money to their mates" when really it's just about people being paid for the work they are doing according to the contracts they signed when they were employed.

The questions we should really be asking are things like "is it good for the industry to have remuneration so closely linked to short-term personal results?" and "how should the worth of individual bankers and traders be determined?" Stuff that gets lost in the "stop the bonuses!" rhetoric which fails to consider why the bonuses are being paid in the first place.

 

[The Passenger]

What, traders are baddies so let's illegally deny them their employee entitlements? Come on.

not gonna get any tears from me mate. the american financial industry is a bunch of cowboys that pretty much held the world to ransom.

my first hand experience with a "trader" was a guy who was ripping off my 85 year old grandma, losing her money in some risky scheme and then taking "performance management fees" on top. total piece of shit.

The media has been shocking in this. Stories like the ones you've quoted are deliberately designed to focus on "hurr durr, opportunistic rich guys in suits giving away public money to their mates" when really it's just about people being paid for the work they are doing according to the contracts they signed when they were employed.

so the employee's get looked after. the exec's get looked after. but those who invested in or with the bank, not fully understanding what they were getting themselves into, often taken advantage of by crooks, they just get to watch most of it disappear? unbelievable.

 

[Caesar]

Advocating that people be treated illegally just because you don't like them isn't a sensible solution.

 

[The Passenger]

They could've always just not give them the bailout money then....

If the company i'm working for here goes broke, then i'm up shit creek regardless of what i've signed. outstanding holiday pay, leave etc,. i get a small portion of that, if any.

 

[Caesar]

Well sure, but then your company isn't structurally integral to the national and/or global economy.

The system definitely needs reform, but you can't do it by just tearing up employee contracts on a whim.

 

[frantelle]

They could've always just not give them the bailout money then....

We could very well be killing each other for food by now if this happened. Regardless of how it came to be, I don't think most people appreciate how close we got to loosing the entire finance industry in America

 

[Dont be a lemon]

how dare people work hard and become successful

You must look down on the many who inherit their wealth and don't earn it.

 

[LouisCK]

Advocating that people be treated illegally just because you don't like them isn't a sensible solution.

We do it with refugees, but they're poor so it doesn't count right?