Taxed too much!

The prevailing narrative when it comes to public employees seems to be that they make too much money. A report by the Economic Policy Institute however finds that at every level of education private sector employees total compensation outpaced that of the public sector.

Regardless of this, the fact remains that many people still feel that they are not getting a good value for their tax dollar. While this may be true, an average American only spends 34% of their total income on public services. The rest of that money is spent on products and services offered by the private sector. It should follow then that Americans would be equally as upset when they don’t get a good value for the remaining portion of their income.

A study by Kevin J. Murphy and Jan Zabojnik shows that in 1970 the Average CEO pay was 25 times as much as the average employee and by 2000 that number had grown to 90 times. Those numbers, however, only take into account the salaries not the total compensation. When total compensation is added in CEO’s receive around 500 times as much as the average employee. This massive increase can only occur in one of two ways. Either the average worker compensation must go down by a corresponding amount or you the consumer are now paying what is essentially a CEO tax on your goods and services. Based on the 2751 companies that the AFL-CIO was able to get the CEO pay for I found that these CEO’s took home 164 times that of the average worker. If you consider the difference from the 1970 average of CEO’s making 25 times what their employees made to the 164 times that these 2751 CEO’s make today, that translates into an additionally $9 billion a year that we as Americans spent on products and services from the private sector.

That of course only accounts for a percentage of the total private businesses and only the CEO pay. When you add in the other companies and executives pay that number grows ever larger. The standard excuse for this CEO tax is that a company has to pay top dollar to get the best talent. Like the CEO has added value to the toaster you just bought. Unfortunately many of the people who feel that this is true are also the same people who complain that the public sector just throws money at a problem and that more money is not the answer. Either money is important to getting the best results or it isn’t. I personally believe that money makes a difference to a point. The Yankees would probably only see a marginal gain if they increased payroll to $1 billion a year.

If the CEO is so important and good CEO’s only work for vast sums of money then the US should be dominating the world in nearly every industry since no other industrialized country has a CEO to worker pay ratio of higher than 57 to 1 while the US has a ratio nearly ten times that. The countries with the lowest ratios, Japan (10:1) and Germany (11:1), are no slouches when it comes to global economies. To make matters worse this enormous difference can’t even be explained away by the free market since according to the Heritage Foundation and the Wall Street Journal the US ranks fourth in "most economically free" behind number one Hong Kong (38:1), number two Singapore (37:1), and number three Australia (22:1).

In the end corporate greed costs Americans billions every year at the checkout line. If you are going to demand value, that needs to apply to every dollar of your money not just the portion that goes to the government.