Salary caps for everyone!

November 09, 1994|By Sam Pizzigati

Washington -- BE CAREFUL what you wish for, goes the adage. You may get it.

The owners of major-league baseball want a salary cap -- on the ballplayers. The players refused, so for the first time in nearly a century there was no World Series.

But this issue could spark America's rediscovery of an idea that once stirred the souls of millions: an income cap on everyone.

Today, of course, it's hard to imagine red-blooded Americans clamoring to limit the income of the extremely wealthy. But clamor they did.

In fact, the movement to cap income started about the same time as the National League.

In 1880, Felix Adler, who founded the Society for Ethical Culture, called for "an income tax graduated up to 100 percent on all income above that needed to supply all the comfort and refinements of life."

Less than a decade later, the best-selling book of the 19th century -- after the Bible and "Ben Hur" -- turned out to be a novel that imagined an America without rich people.

Edward Bellamy's "Looking Backward" inspired thousands of respectable Americans to join a national network of political clubs campaigning for social change.

A generation later, with the United States at war, an equally respectable coalition urged the "conscription of wealth."

Congress debated a proposal that would have insured that "no one in the Republic would have an income in excess of $100,000."

In the 1930s, U.S. Sen. Huey P. Long's "Share Our Wealth" movement claimed seven million members. Once he became president, Long wrote, it would be "against the public policy of the United States for any one person to possess wealth in excess of one hundred times the average family fortune."

Franklin D. Roosevelt's advisers feared Long's impact on the 1936 presidential race. Roosevelt himself understood the power of the movement.

In 1935, he signed legislation raising the federal income tax rate to 75 percent on incomes over $500,000.

In 1942, he announced what may have been the boldest proposal of the entire New Deal era: "No American citizen ought to have a net income, after he has paid his taxes, of more than $25,000 a year," over $200,000 in today's dollars.

The proposal didn't get past first base with Congress. But Congress did eventually raise the top tax rate on income over $200,000 to 94 percent.

In 1943, Americans who made the equivalent of at least $1 million in current dollars paid 78 percent of their total incomes in federal income taxes. As a nation, we have been back-pedaling practically ever since.

In 1990, the richest 1 percent paid 21.5 percent in federal income taxes.

Does this make the idea of capping income nothing more than a historical curiosity? Maybe not.

Campaigns to limit the incomes of the very wealthy seem to gain momentum right after periods where the well-endowed grab a dramatically bigger slice of the national wealth. The 1920s were one such period. And the 1980s were another.

From 1983 to 1989, the lion's share of the nation's total increase in wealth -- 62 percent -- went to America's richest 1 percent. The bottom 80 percent captured just 1 percent of that gain.

The gap between the well-endowed and everybody else is still increasing. Now, the single most potent symbol of that gap could be the $1.2 million average salary paid major-league ballplayers.

Most ballplayers actually don't make a million dollars -- the average is distorted by mega-salaries like Bobby Bonilla's $5.7 million -- and few major-league teams could come close to filling a lineup card with millionaires. Not so on Wall Street.

Last year, the stock analyst team at Donaldson, Lufkin & Jenrette boasted 11 players who reportedly pulled in over $1 million. Those are actually small potatoes.

To make the power-suit all-star team for 1993 -- Financial World's list of the "100 most highly compensated Wall Streeters" -- you had to make at least $10 million.

Facing incredible excesses like these, Congress has begun to wonder if society ought to draw a line somewhere and say so much is too much.

Last year, for the first time in American history, Congress actually legislated a cap -- of sorts.

Until last year, corporations could essentially pay top executives as much as they wanted, then deduct from their taxes whatever bloated compensation they paid as a legitimate "business expense."

The Clinton administration proposal adopted by Congress limits the corporate deduction for CEO compensation to a cool $1 million.

Naturally, this new law is chock full of loopholes. But the loopholes are beside the point. As a society, we've set our first "salary cap." Why couldn't there be others?

Sound far-fetched?

Once upon a time, the idea of a minimum wage did, too. But today we take it for granted. If ballplayers can be capped, what's wrong with capping owners? What's wrong with capping everybody? Sam Pizzigati, a labor journalist, is author of "The Maximum Wage." He wrote this for the New York Times.

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