2.07.2007

Class Warfare comes to Maryland

Hat tip to Maryland Law.

I have mixed feelings about a Maryland Senate bill aimed at taxing excessive executive pay. As a progressive, I do find most executive bonuses to be excessive, and I agree that something should be done to curb them. But I also fear that this bill will hurt Maryland's economic interests because it is a state based bill.

Senator Paul G. Pinsky weighs in on the necessity of the bill:
“At the end of the day, they have to pay taxes on their profits. There are no limits on their ability to write off compensation packages. So if one company has an executive who’s paid $300,000, and another $15 million, that $15 million is considered a legitimate business expense, and I think it’s not,” Pinsky said. “When you get a corporate write-off for that, it transfers the tax burden to middle- and working-class people. I think we’re losing money.”
I am inclined to agree, these bonuses should not be tax deductible. In fact, I am inclined to agree with the whole bill and its proposed implementation. My problem is, if CEO's only have the follow the rules in Maryland, what will stop them from picking up shop and heading out of state? Not too much.

A bill like this needs to be passed nationally, and unlike some other issues, where it is beneficial for states to take the lead, that seems not to be the case here. Maryland should not handicap itself with the good-intentioned, economically populist legislation until we are sure that it will not adversely harm our working class population with loss of jobs or revenue. Otherwise, we could be placing ourselves at a serious economic disadvantage in the future.

1 comment:

Rfustero said...

I agree that executive compensation is much to high, and I too have a problem with the government controlling how much can be paid out in bomuses.

I recall during the late 80's and 90's executives were getting large large bonuses while the lower income employees were getting fired.

This led to a Federal Tax bill in which bonuses were taxed at 49%.

I remember this, bevause in my situation, many of the oldtimers who worked for Giant were getting bonus checks instead of raises and they were taxed at the 49% rate.

I would like to think that the head honchos who are handing out these bonuses would look at the negative impact that these deals create in the media and among their employees- and change on their own. but alas that would be too much to hope for/.