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Could Tax Close Pay Gap Between Oregon CEOs, Workers?

A proposed tax in Portland would apply only to companies at which CEO salaries are at least 100 times greater than their median employee salaries. (mSeattle/Flickr)
A proposed tax in Portland would apply only to companies at which CEO salaries are at least 100 times greater than their median employee salaries. (mSeattle/Flickr)
October 24, 2016

PORTLAND, Ore. – If you found out the CEO of your company was making a hundred times or more what you were making, would you want your city to do anything about it?

The City of Portland just might.

This Wednesday, the Portland City Council will hold a public hearing on a surtax that would be levied on publicly traded companies where CEO salaries are at least 100 times more than median worker salaries.

Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies, says high CEO salaries reach beyond the concerns of just shareholders.

"I think it should be clear, since the financial crisis in 2008, that our CEO pay system is out of control and is encouraging reckless behavior that really affects all of us," she states.

Portland's Revenue Bureau estimates the proposal could raise between $2.5 million and $3.5 million.

City Commissioner Steve Novick introduced the surtax idea and says he wants to see the extra money go to the Joint Office for Homeless Services.

Under the proposal, if the ratio of CEO to employee pay is 100 to 1, the company would pay a 10 percent surtax on top of the business license tax that companies already pay.

At 250 to 1, a company would pay a 25 percent tax.

Anderson says companies could respond to this policy in a few different ways.

"Narrow their gaps between their CEO and their worker pay by either bringing down the CEO-pay end of it, or by lifting up their worker pay,” he explains. “Or both."

Of course, some companies also could opt to find another place to do business.

Anderson says California and Rhode Island looked at similar taxes in 2014, but they may have jumped the gun.

Starting next year, the federal Securities and Exchange Commission is requiring publicly traded companies to reveal compensation ratios between CEOs and their workers.

Anderson says this disclosure rule would make this type of tax much easier to administer, in Portland or across the country.

"We're really at the very beginning of what I think could expand to be a much larger movement, in the same way that the living-wage campaigns started out in certain localities, but have really spread like wildfire across the country," she states.

Eric Tegethoff, Public News Service - OR