Jeff Chiu/AP Photo
Tents line a sidewalk on Golden Gate Avenue in San Francisco.
Last week, San Francisco voters approved a ballot measure entitled the “Overpaid Executive Tax,” which addressed the absurd disparity in pay between CEOs and the people who work for them. In the 1960s, when unions were strong enough to win decent pay for workers, and taxes on the highest incomes were at least three times higher than they are today, the average ratio between CEO pay and the pay of the company’s median worker stood at roughly 20 to 1. Today, it stands at 320 to 1, which either means that today’s CEOs are 16 times more productive than their CEO predecessors, or else that corporate overlords have attained vastly more power than workers in the subsequent half-century.
Believing, rightly, that it’s the power disparity that’s changed, rather than CEOs’ relative financial (much less, social) merits, San Franciscans voted to act in last week’s election. Any company doing business in the City by the Bay whose CEO makes more than 100 times the company’s median worker will now have to pay the city a 0.1 percent surcharge on its annual business tax. If that ratio exceeds 200 to 1, the surcharge goes to 0.2 percent, and so on up the inequity chain.
My gut (which, I admit, has been wrong before) tells me that Americans would gladly support raising such surcharges to something a good deal more substantial. In most cities, a tenth or two of 1 percent would be chump change, but as San Francisco is a place where Mark Zuckerberg, Elon Musk, and their well-heeled ilk loom large, real dollars are involved even at the new law’s low levels. The measure is estimated to bring in between $60 million and $140 million a year to city coffers. (For context, this would cover between 28.6 and 66.7 percent of the city’s projected two-year budget deficit in this and the next fiscal year, according to city controller estimates.) The measure’s author, city Supervisor Matt Haney, would like to see those funds directed to health services.
Even if the tax leads companies to avoid it by scaling back their monstrous pay packages for CEOs, that would also be a positive development for reducing inequality. Maybe some of that excess could go to frontline workers, diminishing the gulf between both ends of the income scale.
Under the terms of the Dodd-Frank Act, the Securities and Exchange Commission was charged with annually calculating and publishing every publicly traded corporation’s CEO-to-worker pay ratio. Corporate resistance to this legal mandate was so fierce, and President Obama’s SEC so reluctant to offend big business, that it took several years for it to compile those ratios and make them public. Once it did, Portland, Oregon became the first city to enact this kind of measure; San Francisco, which modeled its new law after Portland’s, is now the second.
The Portland measure was authored by then–City Councilmember Steve Novick, who called me out of the blue one day late in 2016 to tell me about the new ordinance, which I hadn’t heard about. The reason he called me was also to tell me that he’d first seen the idea in a piece I’d written in the Prospect in 2014. I’ve since also stumped for such a tax in op-ed columns for The Washington Post and the Los Angeles Times. So far as I know, I’m the only ink-stained wretch who’s banged the drums for this proposal (which has also been promoted by the Institute for Policy Studies) over the years. I readily acknowledge the self-indulgence I’m engaging in here, but as the union leader and Victorian rhetorician John L. Lewis once noted, “he who tooteth not his own horn, the same shall not be tooted.”
Multiple polls have shown support across the political spectrum for raising taxes on the rich, which is one reason why I suspect that putting surcharges on corporations that pay their top honchos obscene sums of money while assiduously holding down the wages of the people who do their work would be widely popular. A bill to that effect was introduced in the California legislature by then-state Sen. Loni Hancock several years ago, but failed to win enough votes to pass, despite the Democrats’ overwhelming majorities in both chambers.
At a time when the ability of government to diminish our stratospheric disparities in income and wealth is rightly called into question, and at a time of financial stress in state and local governments due to revenue shortfalls from the pandemic, this kind of pay-ratio tax—with higher surcharges than those in the San Francisco measure—seems just the sort of thing that the increasingly progressive city councils in New York, Chicago, Los Angeles, and other cities, as well as state legislatures of a similar bent, should be adopting. If they don’t, proponents should take a lesson from San Francisco and submit it to their voters.
