Here is a proposed federal law that would raise the wages of essential workers in big businesses that pay very high wages to management employees while paying barely survival wages to its essential workers.

Wage Gap Tax

The wage gap between essential workers and the managers who manage those workers is growing.  The middle class is disappearing.  And low-income workers are placing a growing economic burden on taxpayer-funded programs such as low-income housing and low-income food sources.  Here's a simple way to solve this problem.

We simply need to impose a “wage gap tax” on big and medium-sized businesses that pay very high wages to managers without also paying reasonable wages to their essential workers.  The essential workers are the ones who do the work that brings wealth to the business.

This wage gap tax is calculated using these steps:

  1. Identify the half of the employees in the business who earn more money, and calculate their average wage.
  2. Calculate the average wage of the other half of the employees in the business.
  3. Subtract the two numbers to find the difference.
  4. Divide the difference by the annualized government-specified minimum wage.
  5. From the result, subtract the decimal number 1 (1.000...).  This decimal number is the “wage gap index.”
  6. Multiply the result times a wage tax penalty rate, which typically would be around one third of the annualized government-specified minimum wage.
  7. The result is the “wage tax penalty” for that business. This amount is due once each year, to be paid along with other business taxes.

If the wage gap tax is zero, the business does not owe any extra tax.  Otherwise the wage gap tax can increase to high levels if a business pays very high wages to managers without also paying reasonable wages to its essential workers.

Notice that, unlike “tax-the-rich” proposals, this reform does not attempt to identify which wealthy people are earning “too much” money.  Consider that there are key employees who deserve to earn very high wages.  However some businesses extend this concept to include way too many management employees.

This wage gap tax gives a tax advantage to businesses that strengthen the economy by paying fair wages to the bottom half of the employees in their business.  Conversely, it imposes a higher tax burden on businesses that pay very high wages to managers without also paying reasonable wages to the essential workers who do the work that brings wealth to the business.

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© Copyright 2021 by Richard Fobes at www.SolutionsCreative.com   All rights reserved, except that this proposal can be copied as needed to promote it and implement it.

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