Reed Hastings: Please Raise My Taxes
nytimes.com
Reed Hastings: Please Raise My Taxes
1–10 of 13 posts
Re: Reed Hastings: Please Raise My Taxes
#2What's stopping Hastings from paying more now, without any change in the law?
I suspect that he could even make "pay more" a condition of employment at NetFlix.
I'll bet good money that Hastings is arranging things so a huge fraction of the money he makes goes to entities that won't pay a dime in taxes when he dies, that he's going to exempt himself from the estate tax.
Re: Reed Hastings: Please Raise My Taxes
#3Reed writes:
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
The only different between a 33% marginal tax rate and a 50% marginal tax rate, of course, is that now the board have the pay the same executive $4 million pretax to get the same after tax dollars in his pocket ... and the bitching and moaning about high executive salaries will ramp up in proportion.
Reed is a pretty smart guy, but this is a pretty stupid editorial.
Re: Reed Hastings: Please Raise My Taxes
#4Reed writes: 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 So if it currently takes $2 mill / year in an executive's pocket to get him on board, and that means $3 mill / year pretax (because, as Reed points out, the current tax…
why, with a higher tax rate, is it going to take any less to get the same executive on board?
The difference is that with a pay cap, no matter where an executive works, he gets paid the same. He has no incentive to compete against his peers. Within a high tax-bracket (with no pay cap), instead, executives have incentive to compete, because their salaries are able to differ from one-another.
Re: Reed Hastings: Please Raise My Taxes
#5Reed writes: 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 So if it currently takes $2 mill / year in an executive's pocket to get him on board, and that means $3 mill / year pretax (because, as Reed points out, the current tax…
why, with a higher tax rate, is it going to take any less to get the same executive on board? The difference is that with a pay cap, no matter where an executive works, he gets paid the same. He has no incentive to compete against his peers. Within a high tax-bracket (with no pay cap), instead, executives have incentive to compete, because their salaries are able to differ from one-another.
Or executives may have an incentive to go to the UK or Australia.
American companies compete with international companies for executives.
Re: Reed Hastings: Please Raise My Taxes
#6Or CEOs could be the philanthropists themselves. If you contract out your building cleaning, for example, start there -- start with the people on the bottom who show up to clean your bathrooms or vacuum your carpets. Find them, ask them if they could use a raise. Then find your next lowest-paid employees, maybe the interns or "temp" people or the part-time workers, give them a raise.
"Paying up" in hopes that prosperity will trickle down has proven to not work very well.
Re: Reed Hastings: Please Raise My Taxes
#7Reed writes: 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 So if it currently takes $2 mill / year in an executive's pocket to get him on board, and that means $3 mill / year pretax (because, as Reed points out, the current tax…
why, with a higher tax rate, is it going to take any less to get the same executive on board? The difference is that with a pay cap, no matter where an executive works, he gets paid the same. He has no incentive to compete against his peers. Within a high tax-bracket (with no pay cap), instead, executives have incentive to compete, because their salaries are able to differ from one-another.
The way I understood it, the pay cap is only for companies that take government money. So companies that are already in trouble are going to be the ones that can't attract the new executive talent they need to survive. If a company that takes government money can't turn itself around and still fails, then all the bailout did was postpone the failure - and the government loses its investment - a bad deal all around.
Re: Reed Hastings: Please Raise My Taxes
#8Earlier quoted context omitted.
why, with a higher tax rate, is it going to take any less to get the same executive on board? The difference is that with a pay cap, no matter where an executive works, he gets paid the same. He has no incentive to compete against his peers. Within a high tax-bracket (with no pay cap), instead, executives have incentive to compete, because their salaries are able to differ from one-another.
The way I understood it, the pay cap is only for companies that take government money. So companies that are already in trouble are going to be the ones that can't attract the new executive talent they need to survive. If a company that takes government money can't turn itself around and still fails, then all the bailout did was postpone the failure - and the government loses its investment - a bad deal all around.
the pay cap is only for companies that take government money.
Yes, it is. Reed Hastings' proposal is, however, not just for companies that take government money.
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.
That isn't to imply that there are not healthier alternatives. Andrew W. Mellon advocated a flat income-tax rate of 10%: http://www.archive.org/stream/taxationthepeopl033026mbp/taxa...
the Government received substantially the same revenue from high incomes with a 13% surtax as it received with a 65% surtax. It is not too much to hope that some day we may get back on a tax basis of 10%, the old Hebrew tithe, which was always considered a fairly heavy tax.
Re: Reed Hastings: Please Raise My Taxes
#9I'm surprised that Hastings didn't mention that there's already a "luxury tax" on CEO salaries over $1M.
Ordinarily, salary is a deductible biz expense. However, there's a cap - if Netflix wants to pay Hastings $2M/year, it can only deduct the first $1M.
This cap doesn't apply to performance-based pay or options.
Curiously, options and the like for CEOs and so on didn't become popular until that cap was imposed.
Oh, and he's wrong about tax rates. CA's top rate is over 9% (it hits that at around $50k) and the fed top rate is almost 40% and there's a phase out of deductibility of state taxes. If he's paying around 30%, he's not working for salary.
Re: Reed Hastings: Please Raise My Taxes
#10Or CEOs could be the philanthropists themselves. If you contract out your building cleaning, for example, start there -- start with the people on the bottom who show up to clean your bathrooms or vacuum your carpets. Find them, ask them if they could use a raise. Then find your next lowest-paid employees, maybe the interns or "temp" people or the part-time workers, give them a raise. "Paying up" in hopes that prosper…
Or he could his money in a bank, where it would be lent to new business, used to build houses, etc. Or in a new business as stock, or venture capital. Capitalism - what a great idea !
He seems to think government bureaucrats will do a better job investing the money after they take it from him. Which in itself creates an incentive not to earn more money.