Increasing Portland’s CEO Pay Surtax Would Boost Revenue and Encourage Narrower Pay Gaps

For over 30 years I’ve conducted research on executive compensation and corporate tax policy at the Institute for Policy Studies, a nonpartisan research organization in Washington, DC. Back in 2016, city council member Steve Novick invited me to Portland to share my analysis with other members of the council before the vote on his proposed CEO pay ratio surtax. My analysis of that original surtax was that it would deliver multiple benefits.

1. It would incentivize corporations to narrow the pay gaps that are a key driver of the skyrocketing inequality that is undermining our economy and our democracy,
2. It would generate much-needed revenue for public services, and
3. It would encourage sound business practices. Extensive research shows that extremely wide pay divides undermine productivity. A Harvard Business School study of 1,500 firms, for example, found that companies with huge pay gaps saw significantly higher levels of employee dissatisfaction and turnover and lower sales.

Ten years later, I’m so pleased to see that this tax has functioned very well. The main measurable impact has been in revenue generation, which has averaged about $5 million per year.

It’s hard to provide evidence that it’s had an impact on narrowing pay gaps. Our grossly unfair corporate compensation system is deeply entrenched. Even I was shocked when, at the height of the pandemic, corporate boards showered their CEOs with bonuses to protect them from the crisis while so many low-wage workers were on the frontlines, risking their lives to keep our economy going.

But I know that councilor Novick’s main intent was always to do something historic that would spark similar reforms in other jurisdictions that could eventually build sufficient pressure to make our pay system more equitable. And the Portland tax has undoubtedly inspired similar efforts. San Francisco adopted a pay ratio tax in 2020 and legislators have introduced similar bills in at least 10 states and at the federal level.

And so at this moment, after 10 years of Portland bravely experimenting with an innovative approach and proving that it works, I think expanding on this success by adopting the Fair Share Tax proposal makes a great deal of sense. I’ll give five main reasons.

1. The need for new revenue is great. You all know the data on this better than I do. But Portland is not alone in facing budget challenges, particularly as the federal government slashes spending.

2. Large corporations today in general have a lot of money. While working families are struggling, U.S. corporate profits reached a record annualized rate of more than $4 trillion in the second quarter of 2026. One reason large corporations have such high profit rates is that they are paying relatively little in taxes.

The 2017 tax reform slashed the corporate tax rate from 35% to 21%. That reduced federal revenue by an estimated $1.3 trillion over a decade. And while large corporations promised to use their tax windfalls to raise worker pay, instead they’ve gone on a stock buyback spree. This is a once-illegal financial maneuver that artificially inflates CEO stock-based pay while siphoning resources from worker wages and other long-term investments.

A study by economists with the congressional Joint Committee on Taxation found that the corporate tax cut of 2017 sharply boosted executive compensation while doing nothing to increase wages for workers in the bottom 90% of the income scale.

3. Expanding the Portland surtax to include more brackets makes sense. This would capture more revenue from the very largest corporations with the very largest pay gaps – in other words, those with the greatest ability to pay.

The adjusted rates and brackets would also bring the Portland tax more closely in line a federal bill called the Tax Excessive CEO Pay Act, introduced in the U.S. Senate and House. Oregon Senator Jeff Merkely, ranking member of the Senate Budget Committee, is a co-sponsor of this bill and Senator Bernie Sanders is the lead sponsor.

In both the Fair Share Tax proposal and this federal bill, the surtax kicks in with a fairly modest rate on companies with pay ratios between 50 and 75 to 1. And then there are several more brackets, with the top one being for companies paying their CEOs more than 500 times their median worker pay.

Here’s an incomplete list of companies that operate in Portland and had pay gaps in 2025 far in excess of 500 to 1: Best Buy, Chipotle, Dollar Tree, McDonald’s, Starbucks, Target, and Wells Fargo. If they can afford to pay their CEOs hundreds – and in some cases more than 1,000 times – more than their typical employee, they can afford this modest tax on their Portland profits.

And keep in mind that this is a voluntary surtax. Companies can avoid it altogether by narrowing their pay gaps to below 50 to 1 by lifting up worker pay or reining in their CEO pay.

Also keep in mind that this surtax only applies to companies that are turning a profit in their Portland operations. And so if they responded to the tax by leaving the city, they would be forfeiting profits. As Steve Novick wrote back in 2016, “It would be absurd for Wells Fargo to close profitable branches in Portland just because they’ve become slightly less profitable.”

The introductory presentation also addressed the concern that corporations would pass on this tax to customers by raising prices. I’ll just add that if Starbucks tries to do that, I wish them good luck in competing against the many wonderful independent cafes in Portland!

4. Expanding the Portland surtax would be popular. One national poll asked people their views on a tax hike on corporations with pay gaps of more than 50 to 1. Overall, 80 percent of likely voters favored such taxes, including 89 percent of Democrats and 71 percent of Republicans. This is not a partisan issue.

5. The proposal’s tax relief for small businesses is a practical addition. That would help level the playing field with large corporations that can hire armies of lawyers and accountants to exploit every loophole, including hiding profits in overseas tax havens, something small businesses can’t do.

And so for all these reasons – and maybe some I’ve left out – I strongly encourage support for this proposal. Through the Fair Share Tax, Portland would have more revenue to invest in a healthy community while also emboldening the kind of action we need around the country to tackle the dangerous levels of inequality that are fraying our social fabric and undermining our economy.