Follow the Dollars

Hilzoy has a nice take on the AP story about how executives at the banks that took bailout money earned $1.6 billion this year in bonuses.

The super-rich seem to me, during the past few decades, to have wafted off into their own alternate universe, in which of course they are entitled to have their employers pay them not just large salaries, not just multi-million dollar bonuses every year, but the bills for everything that ordinary people pay for; in which flying on public airlines seems to them the way taking the public buses seems to much of the middle class; in which any possible contact with what the rest of us take to be reality has been airbrushed away by vast quantities of money.

But I think she misses one key reason for the rise of companies paying for everything from limos to home security systems - taxes. If your company gives you $10k for your financial planner, the government will tax you on that as earned income. But if the company is just putting that person on retainer and then asking them to go talk to you the company can count it as a business expense and lower their tax liability. The fundamental problem of multi million dollar executives hasn't been that we are creating more of them - if a company wants to pay its CEO $100 million that is their business - it is that we have been systematically shifting the tax code over the years so that their tax bills have been going down even as their income goes up.

Equity-based compensation goes up, we reduce capital gains taxes. Cash bonuses rise, we drop the marginal tax rates on the high end of the scale. Employee perks multiply (the gold plating republicans like to rail about), we give corporations even more room to write them off. And all the while, the resources to help out the employees you are screwing over dry up.