KRISTOFFER TRIPPLAAR/SIPA via AP Images
At Walmart, the ratio of CEO pay to average worker pay is 983-to-1.
As the Democrats hammer out the particulars of their impending infrastructure bill—a multitrillion-dollar effort to bring America into the 21st century—they’re also going to propose some tax increases to fund this and other overdue social programs. One such proposal, recently floated by the dynamic duo of Elizabeth Warren and Bernie Sanders, is a tax on wealth in excess of $50 million. Another proposal was introduced in the Senate just yesterday by Sanders and in the House by Rep. Rashida Tlaib. It calls for increasing the tax rate on corporations whose CEOs make more than 50 times the pay of their median worker by 0.5 percent, on those whose CEOs make 100 times that by 1 percent, and so on up to a 5 percent increase on corporations whose CEOs make more than 500 times what their median workers earn.
Currently, the average U.S. CEO makes roughly 320 times the pay of their average employee. At Walmart, the ratio is 983-to-1; had the tax been in effect in 2019, it would have compelled Walmart to pay an additional $855 million in federal taxes. At CVS, the ratio is 790-to-1, which would have yielded $450 million in taxes that year.
In the 1960s, CEOs made just 20 times the pay of their average worker, but the massive tax reductions on the highest-income Americans enacted over the past half-century, plus the wage stagnation of most American workers as their CEOs worked night and day to weaken their unions, has led to a 16-fold increase (from 20 to 320) in the pay gap. (The one union—de facto, to be sure—that CEOs have strengthened is their very own: They sit on each others’ corporate boards and approve each others’ raises and stock options. Nice work if you can get it.)
I know of no CEO, by the way, who’s actually claimed they’re 16 times better than their 1960s predecessors.
I hope the Democrats get this proposal through the House Ways and Means Committee and to the floor of Congress. Polling shows that even rank-and-file Republicans think the rich are undertaxed and that CEOs’ work isn’t worth 300 or so times what their average employee’s work is worth. Let congressional Republicans vote against it; a better issue for the Democrats in 2022 and 2024 is hard to imagine. It’s similarly hard to imagine a better tax policy, though corporations would surely try to game it.
It was Larry Mishel and other economists at the Economic Policy Institute who began the annual calculations of this ratio two decades ago. The Dodd-Frank Act, passed in 2010, required the Securities and Exchange Commission to calculate that ratio annually, too, but it took the Wall Street–friendly SEC eight years to comply with the act’s mandate. More than a decade ago, Sarah Anderson and other economists at the Institute for Policy Studies began calling for a ratio tax, and around then, I began banging the drum for it in my columns at both the Prospect and The Washington Post. After reading one such column, a member of the Portland, Oregon, city council persuaded his colleagues to enact such a tax in 2016, and last November, voters in San Francisco enacted it by referendum. Such a tax would clearly have far greater impact, however, if applied nationwide.
The Sanders-Tlaib bill, which has a host of co-sponsors in each house, is called the Tax Excessive CEO Pay Act, though I think that a Tax the Unmitigated Chutzpah of CEOs Act would work just as well.
