Wage ceiling

The dismal science Economics

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A wage ceiling, also called maximum wage, is a system in which there is a limit to the salary one can have, and when someone receives salary, if the salary is more than the maximum wage, the surplus is taken by the government.

Positive aspects

The positive aspect of a wage ceiling would be that it might solve the deficit and could allow the government to spend more money on communist policies education, healthcare and many other social programs. One other good aspect is that the wage ceiling would allow for lower taxes on those who earn less than the maximum wage, since these taxes wouldn't be needed anymore.

Negative aspects

The most common argument against maximum wage is that, if the wealthy get a limit on how much they are paid, they'll go away, in another country. Without the wealthy, the government would lose money, there would be fewer jobs, etc.

A maximum wage would stop people to try to earn more money, because they wouldn't earn it anymore, leading to lower government revenue. This is different to proposals for a tax rate below 100%, which could in some circumstances encourage people to work harder to match the income they are losing to tax.

Another problem is that the rich are good at getting around tax rules, with instruments such as trusts and offshore companies, and also can receive income as capital gains, shares, interest-free loans, and other things with different taxation.

Proposals

Felix Adler, the German-American rationalist and social reformer, was one of the first to suggest a 100% tax on income above a certain level, in 1880. Franklin Roosevelt proposed a 100% top tax rate in 1942 during World War Two, with support from labor unions; opinion polls also showed the majority of the population was in favor, but he ended up with a rate of only 94% for income over $200,000.

The Green Party candidate Jello Biafra proposed a maximum wage of $100,000, and no tax on those who earn less. One could argue that in case of a mass emigration by the wealthy, the government would take a long time to recover from the deficit. Also, the $100,000 maximum wage is possibly too low. Keith Ellison has also suggested a maximum wage, denying that he was joking. The French Socialist candidate Jean-Luc Mélenchon proposed a maximum wage that would be 20 times the median wage in his platform for the 2012 presidential election, but never talked about it again in the next election.

Similar ideas

A similar idea is to limit the gap between CEOs and employees. The city of Portland had a similar idea, as they decided to put a surtax on corporations where the gap between employees and CEOs is more than 1 to 100.

An alternative is a restriction on maximum liquid wealth, which requires people to reinvest income above a certain limit, rather than keeping the money in the bank: the money does some economic good in stimulating investment. This is somewhat similar to some versions of a wealth tax, in which some or all forms of money held by an individual are subject to taxation.

See also

• Minimum wage
• Basic income