On reasonable incentives

The NDP released a couple of interesting policy proposals today. I'll deal with the better-publicized one (Jack Layton's call to reward e-filing of taxes) later on, but let's first take a quick look at Chris Charlton's proposal to discourage skyrocketing executive pay through the corporate tax system:

NDP MP Chris Charlton (Hamilton Mountain) is introducing a new bill to help close the gap between the wages of working and middle class families and the skyrocketing salaries of Canada’s highest earning corporate C.E.O.s.

“Over the last ten years Canada’s top earners have seen their slice of the pie more than double - while ordinary Canadians are increasingly missing out on their fair share,” said Charlton. “What does it say to our workface when, by 10:00 a.m. on January 1st, the top paid C.E.O.’s have earned more than most people make in a year?”...

Charlton’s bill aims to curb tax incentives that reward companies for paying stratospheric salaries to their top-paid C.E.O.’s by allowing them to deduct remuneration as a business expense. The legislation would cap the allowable deduction for company officer remuneration at $1 million per year.

“This bill doesn’t argue that C.E.O.s shouldn’t be compensated for their experience, talent, or dedication to their jobs,” said Charlton. “But it does try and reverse the trend we’re seeing where their salaries are completely out of proportion with what the rest of the country takes home.”

It should be noted that the bill's impact would only be be incremental: the marginal cost of executive salaries beyond the $1 million level would presumably only increase by the then-current level of corporate tax, and then only to the extent that companies can't get around it by labelling officer pay as something else. In addition, the bill wouldn't seemingly do anything to rein in the process of executives deciding each others' compensation which has helped to fuel the rise in their pay.

While the bill isn't particularly far-reaching, though, it does figure to be a difficult one for other parties to argue against substantially. After all, it can't be a pleasant position to try to justify why executive salaries should be deductible above the seven-figure mark, particularly given the salaries paid to civil servants with comparable responsibility. And hopefully that will encourage the Libs and Bloc to support a small first step in reducing the current incentives toward income disparity.