Trickle Upper: Portland Cracks Down on Excessive CEO Pay
By Amanda Teuscher | Dec 20, 2016
In 2017, Portland, Oregon, will become the first city to impose a surtax on companies with CEOs who make more than 100 times their workers’ median pay—an idea that was floated by Prospect executive editor Harold Meyerson two years ago.
“If congressional liberals want to diminish economic inequality, they should also promote legislation that would link corporate tax rates to the ratio between CEO pay and the firm’s median pay,” Meyerson wrote in 2014. “They [CEOs and their boards] would … have a self-interest in raising their workers’ wages.”
The Portland rule, which Councilmember and City Commissioner Steve Novick told Meyerson was inspired by Meyerson’s writing, requires companies to pay an additional 10 percent in taxes if their CEO pay is 100 times their median worker’s pay, and an additional 25 percent if the ratio is more than 250 to 1. Novick told Meyerson that there were 540 such corporations doing business in Portland—five of which are based there.
A similar bill was proposed in California in 2014, but died on the state Senate floor. The 2010 Dodd-Frank financial-reform law required the Securities and Exchange Commission to publish U.S. corporations’ CEO-to-worker pay ratios.
“When I first read about the idea of applying a higher tax rate to companies with extreme ratios of CEO pay to typical worker pay, I thought it was a fascinating idea,” Novick told The New York Times after the measure passed on December 7. In The Guardian, economist Branko Milanovic was also quoted praising the idea, saying “it seems [to be] the first tax that targets inequality as such. … It treats inequality as having a negative externality like taxing carbon emissions.”