Or could it be another, also buried, question - who will use the threat of salary regulation, the process of salary regulation, and the consequences of salary regulation - as leverage and for what purpose?

The last paragraph is quite revealing because it deals with the gap in top and middle salaries and not the buying power of the lowest salary.

This obession with The GAP shows that some people would accept a dramatic reduction in the lowest salary, as long as The GAP is also reduced.

So, what started as the banking witch-hunt very quickly transformed itself into the age-old failed debate

You have to decide what the purpose of tax policy is. If it is to control behavior (like tobacco taxes) then one can't really use it as a revenue source. The extent that it alters behavior removes the income stream.

If is meant to raise revenue, then it should be optimized for this purpose. So, logically the way to get the most from the income tax would be to make the progressivity steeper, eliminate the breaks on unearned income and restore the estate tax. If all the sources of income were treated the same for tax purposes then arguments about changes in behavior of key employees wouldn't hold up.

The reason that compensation has tilted towards bonuses and stock options is strictly an artifact of the tax laws. There are, for example, limits on how much a person's salary can be treated as a business expense. These other forms of compensation get around that. So fix the tax laws and the rest of the issue will resolve itself.

If you believe, on the other hand, that the discrepancy between top salaries and medium salaries is outlandish, then the logical policy is to raise top tax brackets.

Why not regulate the salaries directly? You can institute a 20 to 1 or 30 to 1 rule that directly prohibits these gross disparities in earning, ties the interests of top earners more closely to bottom earners, and also results in firms to plowing more money back into their firms, including in the form of better salaries and benefits for the other employees.

It always seemed oddly inefficient to me that we would first let the firms pay out the big money to the executives, and then take it away. That also seems like a recipe for tax code mischief and government waste. Why go the tax bracket route when we can legislate right to the root of the matter.

At the very least, we can institute a quasi-voluntary 20 to 1 system, where firms that participate are eligible for all sorts of government benefits unavailable to other firms who pay their execs by the old-fashioned robber-baron system.

We have already seen why simply raising the income tax rate on excessive pay doesn't work. The masters of the universe will simply change the definition of a few words, pay Congress to recognize the new definitions, and back to business as usual.

The unfortunate reality is that once you have a lot of money, there are few restrictions on what you can do. And, if you try to stand in the way of one of the masters as he tries to grab still more money, you are the one who will regret it.

This problem can only be solved when Americans get involved and are willing to vote in their own best interests, not letting expensive campaign ads and TV shows do their thinking for them. That isn't going to happen.

Todd, "botched" financial matters appears to be a bone of contention with William Black, judging from his interview with Bill Moyers yesterday. We might be more accurate to use "criminally fraudulent" as our adjective.

http://www.pbs.org/moyers/journal/04032009/transcript1.html

A higher tax rate for the super wealthy may be a fair and necessary end, but offshore and foreign tax havens are still ripe for the pick'ns. Tax deductable charities are the next in line for serious review, especially the pulpit.

This Bill Moyers Journal interview Friday is staggering, and well worth the read.

I'm with our friend Bill Moyers and his guest. You know that gut feeling? There was no "botching" to it. That sounds like "oops".

"Is there a public interest in regulating salaries?"

Yes, but regulation cannot work when the regulators and the regulated are partners in crime. Our society is terminally polluted. Phony regulation is just another way for politicians to create jobs for their lawyer friends at public expense.

1. pass a maximum salary law that establishes a means by which to calculate the maximum any one individual can earn as an employee--even under contract---that would work to hold down the obscene salaries of executives and others who make far more than anyone could ever justify. One way to do it would be as a multiple of the lowest paid employee in the corporation. That way, if they wanted to make more, they would also have to pay the people at the bottom more and everyone would benefit for once.

2. Also tax the hell out of them. We should go back to a 90% marginal rate on ALL income earned and unearned.

No matter what is done, the rich will remain so and while they might not be quite as filthy rich as before they have no legitimate complaints given what the vast majority of the rest of their countrymen and women live on.

Does it ever seem that, while Western governments have advanced from feudalism to democracy, Western corporations remain medieval institutions, ruled by a few lords with unchecked power. Maybe we need to democratize our corporations (public and private), force transparency about pay at all levels, and require employees to have some vote on company policies, including compensation policies. That would pretty much put an end to the abusive pay practices. If you work by yourself, for yourself, you can pay yourself anything you want. But once you bring other people into your organization, you have to give them a voice in the organization's policies. It sounds radical, but so did the ideas of Jefferson, et al. back in 1776.

Higher tax rates on large incomes would help too.

just skimming the comments here, everyone I see is going on about the tax rate to the individual ...

a more important, and to my mind more basic issue that can be fixed by a simple IRS interpretation ... denying the business from deducting excessive salaries & bonuses as a business expense.

You can pay 'em whatever you want, the lucky ones can pay income tax at the prevailing top marginal rate. but the business can't deduct anything over, say $2 million per year as a necessary and ordinary cost of doing business.

Now clearly a Citicorp or a GE has a zillion accounts and transfer prices that can be manipulated, perhaps, so that the company doesn't incur a higher tax bill because they can't deduct a half a billion or whatever in outrageous executive giveaways ... but at least they'd have to make the effort to do the manipulations, and at some point even for them and at a much sooner place for much smaller companies, that regulation would bite and force businesses to regulate their own behavior.

I'm a bit of fan of big-media sports, I myself might go for an exception for unionized employees of anti-trust-exempted sports leagues, but our Congress is so sleazy, and our pitchfork momentum is so necessary, that I gotta say it's gotta be a populist revolution, with a low limit and no exceptions for anything ... you can pay 'em more than 2 or 3 mill a year, you just can't deduct it as a business expense on the business's tax form.