FOR IMMEDIATE RELEASE
(Washington, DC, December 7, 2016) The city council in Portland, Oregon, adopted a new local tax rule today that sets a landmark precedent for cracking down on excessive CEO pay.
In a 3-1 vote, the council agreed to add a surtax on the city’s existing business license tax for firms that pay their CEOs more than 100 times what their typical worker receives. This will be the nation’s first tax penalty for extreme CEO-worker pay gaps.
The city has identified more than 500 corporations that do enough business in Portland to be affected by the surtax, including many that regularly dominate the highest-paid CEO lists, such as Oracle, Honeywell, Goldman Sachs, Wells Fargo, and General Electric. The measure will generate up to $3.5 million in annual revenue to support public services.
“This path-breaking policy tackles a key driver of our growing inequality,” notes IPS veteran executive compensation analyst Sarah Anderson. “I predict this will spark a wave of similar actions, much like the local living wage campaigns that have spread like wildfire across the country.”
According to the Portland revenue department, most large U.S. cities have tax structures that allow for a similar CEO pay surtax.
The Portland proposal could also build momentum for federal action. Rep. Mark DeSaulnier (D-CA) and Rep. Bonnie Watson Coleman (D-NJ) have introduced the CEO Accountability and Responsibility Act (H.R. 6242), which would increase federal tax rates on companies with CEO-worker pay ratios of more than 100-to-1. Polls show public outrage over CEO pay cuts across the political spectrum.
In assessing the surtax, the Portland government will make use of CEO-worker pay ratio data that will soon be available under a provision of the 2010 Dodd-Frank financial reform law. Publicly held corporations will be required to report the ratio between their CEO and median worker pay to the Securities and Exchange Commission, beginning with 2017 figures.
“We may be at the dawn of a new ‘pay ratio politics,’” says IPS associate fellow Sam Pizzigati, the author of The Rich Don’t Always Win. “Corporate pay policies have been driving our income inequality. With annual pay ratio disclosure, we can start insisting that corporations that do the most to make this inequality worse face real consequences for the damage they’re doing.”
Available for comment:
Anderson is a co-editor of Inequality.org at the Institute for Policy Studies and has been the lead author on all 23 of the Institute’s annual Executive Excess reports. Her executive compensation analysis has been featured recently in Politico, a New York Times editorial and column, Vox, the Washington Post, and Bloomberg.
Sam Pizzigati, email@example.com
Pizzigati is an IPS associate fellow and co-editor of Inequality.org. His most recent book is The Rich Don’t Always Win: The triumph over plutocracy that created the American middle class, 1900-1970 (Seven Stories Press).
- Text of the proposed Portland ordinance
- City of Portland Bureau of Revenue assessment of the proposal
- Institute for Policy Studies talking points on the proposed Portland surtax
- Sarah Anderson, “Take the CEO Pay Fight Local,” U.S. News and World Report
- Federal bill: CEO Accountability and Responsibility Act (H.R. 6242)
The Institute for Policy Studies (IPS-DC.org) is a multi-issue research center that has conducted path-breaking research on executive compensation for more than 20 years. IPS also provides a constant stream of inequality analysis and solutions through Inequality.org and related weekly newsletter.