The $24 An Hour Minimum Wage

It is also worth remembering that the gains were at the top end of the wage distribution, not corporate profits. The before-tax profit share of net income was 23.4 percent in 1968. In 2018 (the last year for which full data are available) it was 24.7 percent.[2] With the data to date showing a drop in the capital share of roughly 0.7 percentage points from 2018 to 2019, the final figure on profit share for 2019 is likely to be a little different from the figure for 1968. This means that the redistribution from workers at the middle and bottom did not go to any significant extent to corporate profits.

The big winners were instead high-end wage earners, people like CEOs and other top-level corporate executives, hedge fund managers and other Wall Street types, higher-paid tech workers, and highly paid professionals, like doctors and dentists. If we want to make it possible for the minimum wage to rise back to its productivity-adjusted 1968 level, then we have to take back the big pay going to those at the top.

I know I harp endlessly on this issue, but reversing the big paychecks for those at the top (this is whole point of Rigged [it’s free]) is essential for improving living standards for those at the middle and the bottom. We can envision various ways to make the economy more productive, and some may actually work, but as a practical matter, if we want to see large gains in living standards for those at the middle and bottom, it will have to come at the expense of those at the top.

There are many on the left who would agree with this view, but then say that they would just tax away the high and very incomes earned at the top. That is an alternative route, but I would argue there are both serious political and practical obstacles to reducing high-end consumption through this channel.

On the political side, in addition to the facing the full-fledged opposition of the rich, efforts at highly progressive taxation often also face opposition by many people who would not be affected by high top-end rates. Part of this is just confusion — almost no one understand the concept of a marginal tax, which is why many middle-income families are terrified their estate may fall one dollar over the taxation cutoff – but part of it stems from concepts of fairness. Some people consider it unfair to tax someone’s income at 80 or 90 percent, even if they do understand that this only applies to income over some high threshold.

But even if we overcome the political obstacles, there are still the practical obstacles. Rich people will not sit there and politely hand over whatever amount we tax them under the law. They will use every tool at their disposal, both legal and often illegal, to avoid paying the legislated tax rate. Remember, if we have a 90 percent marginal tax rate, we are effectively paying rich people 90 cents to hide a dollar of income, or to be closer to the mark, we are paying them 9 million dollars to hide 10 million dollars of income. 

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