Do rich people pay taxes?

In reply to Flynlow, that is capitalism.  Those three groups basically own the company, if you want say, buy them out.  As a stockholder, you either approve of the way dividends are paid or the company is run and keep or add to your stock, or if you don't like it, you sell your stock.  If you still don't like it, if you have the money, you can buy controlling interest by purchasing controlling majority is possible.  If the public doesn't like it, they do not have to buy the products or services the company sells.  In capitalism, just because you don't agree with the way it is being run doesn't mean you can change it on your own.  Owners are still owners. Personally I couldn't care less what a company pays a CEO.  As an investor I look for rate of return and a history of what has been paid in the past.  If you want to look at it morally, look at what they pay their employees compared to what those would make in similar companies in their field.  If you don't like that see options above.  

In reply to racerdave600 :

You don't see a conflict of interest in the CEO and Board of Directors being the only votes that count in approving C-suite pay?  I sure do.

EDIT: My initial response above was a bit off-the-cuff, and I apologize for the snark (left unedited for reference).  You are correct in that I am starting to merge fiscal and moral lines.  However, I think morality should absolutely have some say in how we act (next natural question...but who's morality?  Let's save that for another day).  And here on the message board I am advocating for what I would LIKE to see, not what is.  In the real world, we all have to deal with things as they are, but we can also usually agree when a company crosses the ethical, moral, or legal line to a gross excess. 

To continue my example from the earlier post, I am actually selling all of my shares in the company listed this year, both from a lowering returns perspective, and my disapproval of their actions.  My number of shares (and therefore % vote) is so small as to be meaningless, so I am voting in the only way left: cashing out and going elsewhere.  I used it as an example because I just received my annual shareholder information this week and it seemed relevant, so I did the math. 

Flynlow said:

In reply to racerdave600 :

You don't see a conflict of interest in the CEO and Board of Directors being the only votes that count in approving C-suite pay?  I sure do.

 

EDIT: My initial response above was a bit off-the-cuff, and I apologize for the snark (left unedited for reference).  You are correct in that I am starting to merge fiscal and moral lines.  However, I think morality should absolutely have some say in how we act (next natural question...but who's morality?  Let's save that for another day).  And here on the message board I am advocating for what I would LIKE to see, not what is.  In the real world, we all have to deal with things as they are, but we can also usually agree when a company crosses the ethical, moral, or legal line to a gross excess. 

To continue my example from the earlier post, I am actually selling all of my shares in the company listed this year, both from a lowering returns perspective, and my disapproval of their actions.  My number of shares (and therefore % vote) is so small as to be meaningless, so I am voting in the only way left: cashing out and going elsewhere.  I used it as an example because I just received my annual shareholder information this week and it seemed relevant, so I did the math. 

The bottom line truth is America is loosing in the competitiveness race against countries like Germany, Japan, and China. 

We are losing because our CEO’s and shareholders expect unsustainable returns and benefits. 

The CEO of major German companies is paid 18 times what the lowest paid worker is 

the CEO of major Japanese companies earns 12-13 times what the lowest paid worker does. 

American CEO ‘s  of similarly successful companies are paid between   200 times and up to 4000 times what the lowest worker is paid. 

Yet American companies go to the government for bail outs when the CEO makes mistakes claiming they are too big to fail 

not so in the rest of the capitalist world. 

In reply to GameboyRMH :

Every public company/board I've dealt with disagree with what you're saying. In fact its a big gripe at my current company and now that the stock price has been horrendous the CFO and CEO are starting to feel the heat. Any stock comp, whether ISOs or RSUS etc surely show up in compensation expense.

Flynlow said:

Enyar said:

You would think that if that were the case and price didn't match performance that shareholders would quickly fix that.

You would absolutely think that.  That's how capitalism and the free market are supposed to work.  I love those things, (cue Austin Powers voice, "Groovy, Yay Capitalism!"), they foster innovation and replace deadweight.

Now consider the alternative.  I just received the agenda for the annual shareholder meeting of one of the companies I invest in.  Three groups own 33% of the stock (this is a very large, NYSE listed company, not a small business).  Those three groups are 1.) the Chairman of the Board, 2.) the CEO, and 3.) the rest of the Board of Director members.  This means that before anyone else has a say, one-third of the votes are already cast.  It takes a simple majority to decide most issues.  The next 5 largest investors are all large investment holding companies (Vanguard, BlackRock, BOA, etc.) that typically take a passive approach and either waive or pass their voting rights to someone more familiar with the company (such as a Board Member).  If you add all of those groups up, that is......72.45% of outstanding shares spoken for.  So not much hope for change.  And that's not capitalism, that's crony capitalism.  And, contrary to my first paragraph, I berkeleying HATE crony capitalism. 

As I get older, I begin to think more and more that the game is rigged.  It is not that you can't win, this is still America and opportunities abound, but the game sure is biased against you if you're in the bottom 90%.

If you've got 15 minutes, the Last Week Tonight segment on the Wealth Gap is worth a watch:

https://www.youtube.com/watch?v=LfgSEwjAeno

TLDR, skip to the lottery segment (time starting at 12:04) at the end. 

We're on the same page. The wealth gap and crony capitalism are MAJOR MAJOR issues. I guess where we differ is I think we need a shift towards true capitalism while Gameboy is looking to have teh government decide and lose.

racerdave600 said:

In reply to Flynlow, that is capitalism.  Those three groups basically own the company, if you want say, buy them out.  As a stockholder, you either approve of the way dividends are paid or the company is run and keep or add to your stock, or if you don't like it, you sell your stock.  If you still don't like it, if you have the money, you can buy controlling interest by purchasing controlling majority is possible.  If the public doesn't like it, they do not have to buy the products or services the company sells.  In capitalism, just because you don't agree with the way it is being run doesn't mean you can change it on your own.  Owners are still owners. Personally I couldn't care less what a company pays a CEO.  As an investor I look for rate of return and a history of what has been paid in the past.  If you want to look at it morally, look at what they pay their employees compared to what those would make in similar companies in their field.  If you don't like that see options above.  

+1, but I do care about comp costs and you should too. If a exec is being paid more than he's worth, that's money out of YOUR pocket.

In reply to Enyar : It’s not the way CEO’s are selected and paid.  Most stock is held not by individual investors but rather by consortiums.  They select and reward friends who make them money.  Not people who will invest and grow the company.  

A CEO will often provide people on the board with company paid perks like Corporate jets, Yachts, Vacation homes, New York apartments to attend opera, sports, etc whatever will get the boards approval and support. Building better cars, items or selling more stuff at a profit is way down on the priority list.  

In reply to frenchyd :

So, you are saying stockholders select CEOs who make them money.  And that's a problem???  

Capitalist for-profit compaines are supposed to make money.  There is no moral imperative to build better stuff.  If you don't like their cars (or their CEO compensation, or whatever), don't buy from them.  Generally speaking, if a company builds crap, their customers will respond, and the company will stop making money.  Stockholders will make their unhappiness clear to CEOs.

I don't give a rat's behind how much CEOs are paid.  I know how MY company is run, and I know which companies I invest in that make me money.  After that, who cares?

The "moral dilemna" of CEO pay comes down to people who are not CEOs being jealous of what they do not have, and wanting someone else to come in and "fix it".  Plus a bunch of whining.

My solution for anyone who thinks CEO pay is unfair... Go get a business degree, work your ass off, and strive to become CEO.  Problem solved.   

I have no idea how much my CEO makes.  Perhaps 100X my salary.

I wouldn't want his job for ANY amount of money!

SVreX said:

In reply to frenchyd :

So, you are saying stockholders select CEOs who make them money.  And that's a problem???  

Capitalist for-profit compaines are supposed to make money.  There is no moral imperative to build better stuff.  If you don't like their cars (or their CEO compensation, or whatever), don't buy from them.  Generally speaking, if a company builds crap, their customers will respond, and the company will stop making money.  Stockholders will make their unhappiness clear to CEOs.

I don't give a rat's behind how much CEOs are paid.  I know how MY company is run, and I know which companies I invest in that make me money.  After that, who cares?

The "moral dilemna" of CEO pay comes down to people who are not CEOs being jealous of what they do not have, and wanting someone else to come in and "fix it".  Plus a bunch of whining.

My solution for anyone who thinks CEO pay is unfair... Go get a business degree, work your ass off, and strive to become CEO.  Problem solved.   

 

Look at Roger Smith of GM. He sold bad cars because he cut back on GM’s investments in order to show greater and greater profit in spite of poor quality cars. In effect trading GM’s future profit for short term gain.  

Profit is a given at a Fortune 500 company  that should be a given. Profit and growth has to be like breathing  the real difficulty is proper positioning  for the future.  

SVreX said:

In reply to frenchyd :

So, you are saying stockholders select CEOs who make them money.  And that's a problem???  

Capitalist for-profit compaines are supposed to make money.  There is no moral imperative to build better stuff.  If you don't like their cars (or their CEO compensation, or whatever), don't buy from them.  Generally speaking, if a company builds crap, their customers will respond, and the company will stop making money.  Stockholders will make their unhappiness clear to CEOs.

I don't give a rat's behind how much CEOs are paid.  I know how MY company is run, and I know which companies I invest in that make me money.  After that, who cares?

The "moral dilemna" of CEO pay comes down to people who are not CEOs being jealous of what they do not have, and wanting someone else to come in and "fix it".  Plus a bunch of whining.

My solution for anyone who thinks CEO pay is unfair... Go get a business degree, work your ass off, and strive to become CEO.  Problem solved.   

 

This is so incredibly short-sighted. 

But hey, why should I care? I work for a good company, make a very healthy salary and 401k contribution, cheap amazing benefits that would make most jealous. 

So who cares, berkeley everyone else!

In reply to z31maniac : all that is needed for evil to triumph is for good men to do nothing.  

Right now America is trading its future wealth strength and freedoms for a benefit that even the government admits is 83% to the advantage of the top 1% 

We will soon reach a Trillion dollar a year deficit.  

That has to be paid somehow and in paying it off things every American values will be taken away.  

frenchyd said:

....We will soon reach a Trillion dollar a year deficit.  

That has to be paid somehow and in paying it off things every American values will be taken away.  

Actually, that debt does not have to be paid, and likely never will.  Ever wonder how the US paid for WWII?  HUGE amounts of money spent.  It never did, it just disappeared into inflation.  It's still there, it's just very small in perspective.  You really don't have to pay it off, just do your best not to increase it. As you appear to note, it's the deficit that is the important one to reduce (and appear to be conflating with debt).

"...every thing Americans values..." Everything, you sure about that? No idea where you are getting this.

The US debt is VERY large, but so is it's GDP.  Not entirely out of range of other western countries, especially considering the results (GDP) it is getting.

In reply to z31maniac :

Where's the short-sighted part?

I didn't say a thing about failing to plan, failing to invest, failing to manage long term debt, or failing to build strong companies and society. I said absolutely nothing about berkeleying everyone else, or not caring.

The ONLY thing I said was that whining about CEO pay is not productive.  

For the record, I have no 401K, I've had a modest salary most of my life, and I currently have 4 times the retirement savings of the average person my age.  Long term planning has never been a weakness of mine, and I am strongly in support of it.

You're gonna have to make that case a little better.

This is getting pretty intense, and while I am tempted to close the discussion now, I am going to start by asking everyone to take a deep breath, step back from the keyboard, remember that we're all friends here, and ask that y'all simmer down now.

SVreX said:

In reply to z31maniac :

Where's the short-sighted part?

I didn't say a thing about failing to plan, failing to invest, failing to manage long term debt, or failing to build strong companies and society. I said absolutely nothing about berkeleying everyone else, or not caring.

The ONLY thing I said was that whining about CEO pay is not productive.  

For the record, I have no 401K, I've had a modest salary most of my life, and I currently have 4 times the retirement savings of the average person my age.  Long term planning has never been a weakness of mine, and I am strongly in support of it.

You're gonna have to make that case a little better.

You sound like me a decade ago.  I’d been extremely conservative all my life. I matched all company offered 401k . Set up my own IRA and maxed out company retirement accounts. 

Even my hobby I made pay for itself doing work for others to allow me to go racing. 

What is the expression ?

man plans and the gods laugh

the recession of 2008 happened, my late wife develops cancer, my kids stumbled and suddenly I was holding on by my teeth.  My career gone, unable to find another, the retirements and savings disappeared and I still had to bury my wife.  With no money left and no income.  

If inflation occurs and your income rises with it you are golden. But for retired and those barely  Hanging on those are the ones who will be most damaged.  

One of the reasons social security worked was because older less productive people were replaced with younger more productive people. The trade off where the retired weren’t given enough to really retire but were allowed to keep working past 65 and still collect full benefits denies that improvement. 

Mind you Social security isn’t a entitlement. It’s something we’ve paid for.  

In reply to aircooled :

You make a good case.  I too used to agree that America had always inflated its way out of war debt.

And we had!  

However in the past we had the foresight to compromise in order to move ahead. Statesmanship ruled and while no-one got everything. What there was was shared enough so that America benefited from the two party system.

In the past couple of decades that has been less and less true.   

Flynlow said:

Enyar said:

You would think that if that were the case and price didn't match performance that shareholders would quickly fix that.

You would absolutely think that.  That's how capitalism and the free market are supposed to work.  I love those things, (cue Austin Powers voice, "Groovy, Yay Capitalism!"), they foster innovation and replace deadweight.

Now consider the alternative.  I just received the agenda for the annual shareholder meeting of one of the companies I invest in.  Three groups own 33% of the stock (this is a very large, NYSE listed company, not a small business).  Those three groups are 1.) the Chairman of the Board, 2.) the CEO, and 3.) the rest of the Board of Director members.  This means that before anyone else has a say, one-third of the votes are already cast.  It takes a simple majority to decide most issues.  The next 5 largest investors are all large investment holding companies (Vanguard, BlackRock, BOA, etc.) that typically take a passive approach and either waive or pass their voting rights to someone more familiar with the company (such as a Board Member).  If you add all of those groups up, that is......72.45% of outstanding shares spoken for.  So not much hope for change.  And that's not capitalism, that's crony capitalism.  And, contrary to my first paragraph, I berkeleying HATE crony capitalism. 

As I get older, I begin to think more and more that the game is rigged.  It is not that you can't win, this is still America and opportunities abound, but the game sure is biased against you if you're in the bottom 90%.

If you've got 15 minutes, the Last Week Tonight segment on the Wealth Gap is worth a watch:

https://www.youtube.com/watch?v=LfgSEwjAeno

TLDR, skip to the lottery segment (time starting at 12:04) at the end. 

Exactly!  Your explanation of how it all works is clear and concise.  My error was a focus on the perks and benefits rather than the actual problem. 

aircooled said:

frenchyd said:

....We will soon reach a Trillion dollar a year deficit.  

That has to be paid somehow and in paying it off things every American values will be taken away.  

Actually, that debt does not have to be paid, and likely never will.  Ever wonder how the US paid for WWII?  HUGE amounts of money spent.  It never did, it just disappeared into inflation.  It's still there, it's just very small in perspective.  You really don't have to pay it off, just do your best not to increase it. As you appear to note, it's the deficit that is the important one to reduce (and appear to be conflating with debt).

"...every thing Americans values..." Everything, you sure about that? No idea where you are getting this.

The US debt is VERY large, but so is it's GDP.  Not entirely out of range of other western countries, especially considering the results (GDP) it is getting.

Your graph points out the problem.  While  we are deeply in debt more and more of the Income from our taxes is going to paying the interest on that debt.  

I said things Americans value and find important will be unfounded or underfunded. No judgement  involved here.  If your concern is social or military, infrastructure or technology. More and more of the taxes you pay will simply be used to pay the interest on the debt.  Less will be able to be used for the things American value.

Inflation will add to the cost of that debt 

From  a strategic stand point  Nations like China and Russia  are in a position to gain compared to America. 

Enyar said:

We're on the same page. The wealth gap and crony capitalism are MAJOR MAJOR issues. I guess where we differ is I think we need a shift towards true capitalism while Gameboy is looking to have teh government decide and lose.

The problem is that history has shown that the more "true" capitalism is, the worse the wealth gap becomes. That's why Mexico has it worse than the US which has it worse than Europe which has it worse than the Scandinavian countries. Across places and times the trend is the same, very free economies produce runaway inequality.

Communists often use a similar argument, that communist states failed because it wasn't "true" communism. I think we can see now that neither extreme works.

SVreX said:

I don't give a rat's behind how much CEOs are paid.  I know how MY company is run, and I know which companies I invest in that make me money.  After that, who cares?

The "moral dilemna" of CEO pay comes down to people who are not CEOs being jealous of what they do not have, and wanting someone else to come in and "fix it".  Plus a bunch of whining.

My solution for anyone who thinks CEO pay is unfair... Go get a business degree, work your ass off, and strive to become CEO.  Problem solved.  

I think it's a problem because that money didn't come out of nowhere - that money has been siphoned off from the rest of society, and taking that money out of the hands of working people who are likely to spend it and putting it into the hands of the rich who are likely to stash it is very economically damaging, another aspect of the problem that I'd be happy to discuss.

You can't solve this problem by becoming a CEO any more than you can solve a rash of theft by becoming a thief - if you're successful, it might seem like the problem is solved to you personally, but you've just put yourself on the other side of the problem.

GameboyRMH said:

Enyar said:

We're on the same page. The wealth gap and crony capitalism are MAJOR MAJOR issues. I guess where we differ is I think we need a shift towards true capitalism while Gameboy is looking to have teh government decide and lose.

The problem is that history has shown that the more "true" capitalism is, the worse the wealth gap becomes. That's why Mexico has it worse than the US which has it worse than Europe which has it worse than the Scandinavian countries. Across places and times the trend is the same, very free economies produce runaway inequality.

Communists often use a similar argument, that communist states failed because it wasn't "true" communism. I think we can see now that neither extreme works.

If you look at history  America has been here before. Twice.  First in the late 1800’s when monopolies threaten our freedoms . It Took Teddy Roosevelt to break the trusts. Remarkably he was selected because the trusts thought the safest place to put him was the vice presidency.  ( insert smirk here) 

The second time was during FDR’s first term. At the time the communist party was the fastest growing party in America. It was not only the fastest growing, it was in third place behind the Republican Party. 

By passing social security and various work programs the basic logic of Communism was defeated and quickly shrank in strength. 

GameboyRMH said:

SVreX said:

I don't give a rat's behind how much CEOs are paid.  I know how MY company is run, and I know which companies I invest in that make me money.  After that, who cares?

The "moral dilemna" of CEO pay comes down to people who are not CEOs being jealous of what they do not have, and wanting someone else to come in and "fix it".  Plus a bunch of whining.

My solution for anyone who thinks CEO pay is unfair... Go get a business degree, work your ass off, and strive to become CEO.  Problem solved.  

I think it's a problem because that money didn't come out of nowhere - that money has been siphoned off from the rest of society, and taking that money out of the hands of working people who are likely to spend it and putting it into the hands of the rich who are likely to stash it is very economically damaging, another aspect of the problem that I'd be happy to discuss.

You can't solve this problem by becoming a CEO any more than you can solve a rash of theft by becoming a thief - if you're successful, it might seem like the problem is solved to you personally, but you've just put yourself on the other side of the problem.

We are gonna have to agree to disagree. 

You are presupposing that large compensation for CEOs is a problem in of itself, and equating it to theft. I don't see it as a problem unto itself.  

I also disagree that wealthy just stash money. Wealthy people do not leave money sitting idle- they want it working to make more money. That means they invest it in companies which make jobs for the rest of us, or in luxury items which also make jobs for the rest of us. 

A wealthy man doesn't need money sitting in a bank if he has a piece of paper that says he owns a part of a company which is also bringing him residual income. 

Sorry. Your income redistribution plan is uncompelling to me. 

In reply to SVreX :

And yet many companies are reported to be "sitting" on huge cash reserves. Some in the hundreds of billions. 

Berkshire-Hathaway, for example.