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Argument: Progressive taxation helps combat excessive CEO pay

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Richard Denniss "The case for a new top tax rate". Australia Institute. October 2008 - 1. Introduction Until recently, the idea that executive salaries might be ‘too high’ was dismissed as evidence that the proponent didn’t understand how the ‘global market for talent’ works. In the wake of the global financial crisis, however, limiting executive salaries is increasingly seen as being evidence of good common sense. The Prime Minister, Kevin Rudd, has recently called for an end to ‘extreme capitalism’ and has proposed to rein in ‘excessive’ executive remuneration. Mr Rudd recently announced that: APRA will now develop a template, not just for this nation for the future but also for examination by the G20 and other international institutions, of how excessive executive compensation can be reined in (cited in Coorey 2008). This paper discusses the benefits of introducing a new tax threshold specifically aimed at very high income earners. It argues that the current top tax rate of 45 per cent, which applies to incomes of over $180,000 per year, is inadequate in a corporate environment where CEOs can be paid very large salaries indeed, for example Macquarie Bank’s Allan Moss, who received more than $33,000,000 in 2007, or nearly $130,000 per day.

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