Repeal the Reagan tax cuts

Netflix CEO, Reed Hastings, has an excellent point, but misses the mark. Yes, the very wealthy use more of the commons than the rest of us and should pay a higher tax rate to pay for using the courts, roads, airports, police, fire, etc. What he should have added: Yes, CEOs use their membership on boards of directors to game more compensation for themselves. Yes, many CEOs are more interested in their own compensation than the health of the companies they are well paid to run.

But the real issue is: economic bubbles caused by top wage earners. The last time we entered a period of economic deflation was after three Republican administrations lowered the top marginal tax rates and reduced regulations. The current economic cliff we peer over was brought upon us by the last three Republican and one free-trading Democratic administrations that did very much the same thing. In both cases, the depression followed bubbles in stock and housing. America's experience and understanding the cause of the Great Depression and the current economic colapse shows that top tax rates that are too low cause economic instability, bubbles and ultimately major resessions and depressions.

I am not talking about taking wealth from the highest wage earners, I am suggesting that a system that allows massive capital movement from corporations to the top executives results in decisions that benefit management over the employer. When Reagan lowered the top marginal tax rate, he set into motion the fleecing of well capitalized companies and transfer of taxation from the top wage earners to the middle and lower income earners.

Remember the leveraged buyout mania of the 1980's? The top marginal tax rate of about 70% prevented the would-be corporate raider from profiting by buying and parting-out companies. If the raider had the cash to purchase the company, then there would still be profit, but a heavily taxed profit. The leveraged part of the LBO is: performing the buy-out with others peoples money. Once the cost of capital, from borrowing, was factored in, LBOs, in most cases, would not be profitable for the corporate raider. Leveraged buyout mania equals fleecing corporate America for the benefit of the very few, the corporate raiders.

The I'll-give-you-millions-if-I-am-on-your-board-of-directors, if-you-agree-to-give-me-millions-as-a-member-of-my-board-of-directors game, would not be played if most of the wages, above the top marginal rate level, were heavily taxed and went to the government. When this "game" is played, capital that would be used for employee health care, a war chest for economic down times, research and development for new products and services would go to the top executives. Now we have decisions made for personal gain, in violation of the fiduciary responsibilities of top management.

To say its not fair to heavily tax the very rich is to take the me point-of-view over the we point-of-view. When monies are taken, in the form of excessive compensation, from companies, there are consequences, namely, long term viability and competitiveness of the, now poorer, companies. What is more important, giving top management with whatever compensation they want, or insuring steady long-term growth for the corporation, all its employees and shareholders?

Cutting taxes never results in increased government revenue. The Reagan top marginal tax rate cut reduced tax revenue. This forced Reagan to raise taxes, mostly on the middle class in the form of doubling Social Security deductions, to make up for some of the tax revenue shortfall. Bush Senior also increased taxes, even with his pledge of "no new taxes" to make-up for the shortfall caused by his predecessor.

It's time to revisit the Reagan tax cuts. Tax cuts never fixed a road, never built an airport, put police on the beat or put out a fire. Starving the government, a long term goal of the far right, does not leave the lender of last resort, our federal government, much capital upon which to fight the economic depression our nation, and the rest of the world, is now facing.

Excessive top level management compensation weakens the companies run by these managers. Since management and the compensation committees who set the executive wages are compromised, corrupted, we the people have to step in and ensure the health of our jobs and of our country. Restoring Roosevelt, Teddy (the Republican one) that is, level taxation will restore buying power to America's corporations and give our government the capital it needs to fight the worst economic downturn since the Great Depression.