Is $200,000 a year an "excessive" income?

This question was asked by somebody on an online political forum; what follows was my reply to the inquirer:


Nobody is saying $200k is "excessive"-- depending on what you do to earn it. There are things I wouldn't do for $200k a year.

I think what you're getting at is whether people who make a lot of money should pay more taxes. That is a complicated issue. First, recognize that people who make, say, $200k a year pay the same rate as everyone else on the first $50, 100, 150k of taxable income. If a new higher tax bracket is placed at $200k, only that portion of his total income above $200k is taxed at the higher rate.

And recognize that people are generally only talking about income and estate taxes when they get themselves all worked up about the unfair taxation of the rich. In today's system, someone who makes $100k pays the same amount into Social Security as does that $200k guy. They both pay the same sales tax on a tube of tooth paste. They both pay the same amount of property tax per dollar of assessed valuation. And, to the extent that the rich guy's income derives from capital gains that he didn't work for, he will pay a lower rate than that $50k guy who had to actually go out and sweat for his bread. Warren Buffett summarized the situation nicely when he famously pointed out that his secretary pays a higher percentage of her income in taxes than he does.

Third, take note of the fact that the rich guy is likely to make more use of government services than the poor guy. Not only do the courts devote 90% of their resources to settling disputes among businesses, but the fire departments and police forces are primarily concerned with protecting the property of the rich. Even the streets in the rich part of town are likely to have fewer potholes than in the working-class neighborhoods so those Bentleys and Ferraris ride smoother and retain their resale value a bit better.

And lastly, recall that our gigantic military, on which we spend nearly as much as the rest of the world combined does on their collective armed forces, serves mostly to guarantee the free flow of oil from parts of the world that we have seriously annoyed with our political and military meddling. Money that could be much more wisely spent on building a green infrastructure at home instead goes to maintain and protect the flow of oil dollars into the coffers of America’s most profitable corporations--corporations that even now, in the midst of a worldwide recession, continue to chalk up record profits thanks to the generosity of American taxpayers.

All in all, it's hard to see how the rich are going to be hurt much, or even manage to argue they are being treated unfairly in any sense, if they are asked to come forward with a few more cents on the dollar so that some less-fortunate people can have adequate health care.

The Curmudgeon's Guide to Health Care

I must say I favor a free-market approach to health care: a system in which you can choose your own providers, and where you don't get punished for being taken to the wrong hospital by the wrong ambulance while you're unconscious. You know--a truly competitive system where the good providers get lots of patients and the poor ones get driven out of business because word gets around and nobody will go to them. A system where you and your provider decide what's needed for your care without interference from the corporate beancounters.

Our present system anything but a free market for consumers. Your insurance company dictates what doctor you can see, what hospital you can go to, and whether or not you're going to get that expensive test or procedure. As long as you are well, you are a profit source for them. If you get sick, you become a problem. If you get too expensive to them, they're pretty good at finding ways to dump you. And, as a side-effect of our ingenious employer-based health care payment system, if you get too ill to keep your job, you will automatically end up on the discard heap.

Very few of us can actually afford the kind of care that we might someday need--bypass surgery, say, or cancer treatment. We therefore must have a system in which relatively small payments from the many who do not need expensive interventions help to pay for the relatively few who do need expensive care. That means that the young and healthy need to pay in to the system during those periods of their lives when they aren't using much health care so that their elders can be cared for--and so that someday they too can be cared for in their time of need.

No for-profit insurance scheme will ever provide free-market health care. By their very nature, insurance companies are structured to make profits by denying needed services. They reward the providers who cost them the least, not the ones who save or improve the quality of the most lives.

The great paradox of the Western world is that only way to provide a free market for providers is through universal, tax-funded single-payer health care. In this system, the government serves as the collector and disburser of health care funds. You pay into the health care system--ideally through income taxes--and when you need health services, you go to the doctor of your choice, she treats you, she submits her bill to the government, and they pay. That's the way it works in much of the civilized world, and that's the way it should work here.

The Jackpine Manifesto

The workplace has proved itself incapable of providing adequate health care and retirement plans for its workers. This is particularly the case with small and start-up companies, who lack the advantage of large employee pools. The result is a damping of creativity in the marketplace. People are less likely to engage in risk-taking and innovation when they must sacrifice access to adequate health care and retirement financing in order to do so.

Thus universal health care and a fully funded government retirement system would result in the creation of many new small businesses in new areas such as green technology, precisely where they will answer the emerging needs of society. I believe this system has the potential to stimulate what is best about the profit motive while eliminating some of the worst problems of the current system.

A model for a company in the coming age:

The company will be worker-owned. You will earn increasing shares in the company as a function of the number of years you are employed in that company. If you leave the company for any reason, you may hold your shares until your death. However, when you die, the company will give your estate a fair cash settlement for your share and the remaining workers will retain ownership of the company. This is necessary in order to keep ownership from spreading out among people who have no vital interest in the company.

Not all workers will have an equal share in the company. For example, it would be expected that the entrepreneur who starts the company will retain a larger share of ownership than the other employees. Also, shares in the company may be differentially assigned on the basis of the type of work done. Each worker will receive wages or salary commensurate with their job responsibilities, and in addition each will receive a share of the profits commensurate with the number of shares they hold. Thus every worker will have a stake in making the company more profitable in the long run.