VIDEO: How Cities Can Rein In Overpaid CEOs

In a new More Perfect Union video, Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies and co-editor of Inequality.org, explains how proposed measures to increase taxes on companies with large CEO pay gaps in San Francisco and Los Angeles could help challenge decades of extreme corporate inequality.

The video opens with a stark example: Starbucks CEO Brian Niccol made 1,794 times what the average Starbucks worker earned last year. As the host puts it, “This [pay] gap is almost like a shorthand for understanding the entire economy.”

Sarah Anderson traces today’s extreme CEO-worker pay gaps back to policy choices that reshaped the economy in favor of executives and shareholders.

“Back in the 1960s, the gap between average big-company CEO pay and worker pay was in the range of about 25 to 1,” she says. That began to change as tax policy shifted. “That was a time when top marginal tax rates on the rich were much higher than they are today,” Sarah explains. “And so there wasn’t the same incentive to shovel out all this money to the CEO because so much of it would have been taxed away anyway.”

But beginning in the Reagan era, she adds, policymakers “started really slashing those top tax rates.”

The result has been a dramatic widening of the gap between CEOs and workers, with consequences far beyond corporate balance sheets. The video connects exploding executive pay to an economy where wages have failed to keep up with basic needs, especially housing, even as the cost of living has continued to rise.

“Since the administration of Ronald Reagan in the 1980s, we’ve been hearing this line that we need to lift taxes on the top,” Sarah explains. “And here we are, 45, 46 years later, and we are still waiting for that model of the economy to trickle down to the rest of us.”

In response, workers and advocates in San Francisco and Los Angeles are urging support for ballot initiatives that would increase taxes on companies with massive CEO-worker pay gaps. As Sarah explains, “These overpaid CEO taxes would raise taxes at the local level on companies that have huge gaps between their CEO and their worker pay.”

“The tax would basically give corporations a choice,” she notes. “They could either narrow their gaps and avoid paying the tax, or they would need to pay extra revenue, which would go to really vital services that these cities need.”

These ballot initiatives could also impact efforts to rein in runaway CEO pay nationwide. More Perfect Union notes that “billionaires and corporations are spending big to stop both the tax itself and what it represents: a new kind of economy.”

Watch the full More Perfect Union video here: