How to reduce the income disparity between the rich and the poor?
By Farid Khavari
Common perception is to tax the rich to reduce the disparity between the rich and the poor and to discourage the rich from exploiting the poor!
Before doing that we must understand that this is not the most effective way and will not resolve the existing problems--corruption and greed will continue to rule. Most importantly, the present taxing system provides the rich with plenty of loopholes and other opportunities to escape from being taxed effectively. On the other hand, even an effective taxation of the rich is no guarantee that it will benefit the poor! The tax credits offered to poor people are practically ineffective and worthless, especially, when a person has no job or income!
On the other hand, the primary source of all of our economic woes is the greed of the CEO's of big companies along with the open field for corrupt activities to become corrupt. We need to take away all the incentives from being greedy and corrupt.
Greedy and corrupt CEO's would employ every imaginable economic and financial trick known to mankind or invent new ones to boost their companies' short-term bottom line artificially in order to collect their per contract pre-determined income and bonuses. This could start anywhere from outsourcing of jobs, having disregard for the working people, environment, raw materials and R&D all the way to employing all kinds of dubious methods such as charging all types of fees, fake invoicing and overcharges! In the end we all suffer from an unsustainable and collapsing economy; one that we are currently facing.
The most effective way to eliminate the corruption-inducing incentives from the CEO's would be -- before regular taxation -- that no CEO should earn 10 times more than the lowest earner(s) of that company! In other word: The disparity between the top earning CEOs of a given company should always remain 10 times of the lowest earner(s) of that company! In plain English: If the lowest earner of that company gets $1 boost in income, the CEO should get $10 or vice versa. The regular taxation should apply later after this procedure.
