PERSONAL INCOME

Reality may not be what ‘average’ implies

When the Star Tribune reported the personal income in Minnesota to be \$46,227 per person in 2012 (“Minnesota outpacing U.S. with income rise,” March 28), it should have described how that figure is calculated. Per capita personal income equals “the total amount of income earned by residents of a state divided by that state’s population.” It is therefore an average or mean value, and, as a result, can be quite misleading.

Since an individual’s income cannot be less than zero but there is no limit to how great it can be, a relatively small group of people with extremely high incomes can significantly inflate the average. If four people make \$10,000 and one person earns \$1 million, for example, the average is \$208,000, but the median is only \$10,000! How about telling us the “median” personal income for Minnesota and the rest of the country? Sadly, most readers probably don’t have a strong enough background in mathematics to understand the difference, but that’s a topic for another day.

Thomas C. Bretl, Plymouth

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‘PAY WATCH’

It’s wearying to see what CEOs rake in

Please stop reporting the CEO Pay Watch in your Business section — I can’t take it anymore. The new guy at 3M received almost \$2 million for a partial year (coming on board at the end of February). Additionally, he was given \$4 million in stock awards and \$3 million for option awards. The compensation committee did all this to “recognize his successful first year as 3M’s CEO. Then, we also got to read about the outgoing CEO, who was given \$30 million for working during January and most of February (good thing he left when he did).

I’ve been reading these Pay Watch deals for the last few months, and can only wonder why shareholders don’t rise up and demand their compensation committees stop giving away the farm to these folks. Business performs well when there’s a good product and a demand for that product. To believe that the CEO is responsible for the profits of companies like 3M is not only naive, but infuriating to at least some of us stockholders.

Jim Stromberg, White Bear Lake Township

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The March 28 Short Takes calling the \$200,000 pension of U.S. presidents “generous” and suggesting that they be asked to do more to earn it was disrespectful and ridiculous.

In the same issue, the CEO Pay Watch reported the year’s \$39 million take by 3M’s CEOs, most of it taxed at the 15 percent rate.

The size of 3M seems minuscule in contrast to the role of the U.S. presidency. This is an everyday example of the extreme inequality growing in this nation. Readers seem not to take issue with this specific corporate greed, but workers, who are given no credit for the success of overpaid CEOs, seem to be venting a rising fury. It is evident in multiple media and social networks. Clearly, wise leaders need to pay heed.

Donald Strei, Elk River

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TAX CODE

Reform away! Or … careful with reforms

The March 25 Business section was the best ever! Every article was priceless, but the one by Jim Graves (“A broken tax code, and how we can we fix it”) stood out. It is the first meaningful analysis of our corrupt tax system I have seen in print. However, I would go even further. The current code is not worth fixing. Repeal it entirely and start from scratch.

Never even think about “tax base” or rate structure; a simple, progressive, straight-line tax formula applicable to all income is entirely feasible. Eliminate corporate taxes completely; allow corporations to retain nothing more than reserve funds, and require them to hold it in U.S. Treasuries or state-issued bonds. In other words, all profits must be paid to shareholders, and all new expansion capital must be raised on the open market.

The two basic principles I would follow are:

1) Righteousness: The system must clearly be honest and just, with no foundation for cynicism.

2) Capitalism: The system must be supremely intelligent; it should fund the capital portion of our American enterprise (education, infrastructure, research) primarily by levies on accumulated wealth, with only the current operating expenses of government funded by current income levies.

Too much of our national wealth is devoted to rank speculation, not to investing. Taking too much from current income just as it is beginning to create wealth is clearly counterproductive. So-called “consumption taxes” are the most economy-depressing taxes ever devised. Finally, the tax system must be integrated with the currency control system. Leaving management of our money supply entirely to the Federal Reserve has proven to be disastrous on at least a dozen occasions over the last 30 years.

James M. Peterson, Richfield

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Graves suggests federal tax code reforms. Has anyone studied the outcomes of these changes? Three things concern me about the Social Security and Medicare portions:

1) Since these taxes are currently levied on wages and salaries, how would they be collected under his system, especially from retirees?

2) Medicare premiums are currently based on income brackets with top rates quite high. Does Graves believe that further “means testing” might jeopardize support for Medicare by powerful constituencies? President Franklin Roosevelt was very conscious of this support problem for Social Security.

3). Where will Social Security’s “chained CPI” end? Can beans or Spam be substituted for chicken, which has been substituted for beef?

The simplification of the tax code in 1986 eventually produced tax expenditures and multiple tax avoidance schemes by those able to employ persistent lobbyists. Let us not repeat that mistake — and penalize our citizens up front in the process.

Mary K. Lund, Minnetonka