Lawmakers want to penalize companies for 'outrageous' CEO pay
A trio of lawmakers wants to crack down on “outrageous” CEO pay, by making companies pay a higher tax rate if their chief executives make a “disproportionate” amount of money compared to their workers.
“Income inequality is a huge issue and we have to rein this in,” said Rep. Barbara Lee (D-CA) in an interview with Yahoo Finance. “No longer should the government and taxpayers subsidize the CEO salaries. In fact, they deserve to have a penalty so that we can move forward and invest more in lifting people out of poverty.”
Lee, Sen. Bernie Sanders (I-VT) and Rep. Rashida Tlaib (D-MI) introduced the “Tax Excessive CEO Pay Act” this week, which they say would combat income inequality and corporate greed. Sanders is also running to become the Democratic nominee for president in 2020. He and Sen. Elizabeth Warren (D-MA) are running for the Democratic presidential nomination on platforms targeting the wealthiest Americans.
“In America today, ordinary workers at some of the richest corporations are making poverty wages. Meanwhile, we’ve got a class of corporate CEOs who make hundreds—sometimes thousands—of times more than their employees,” Sanders said in a statement.
A recent report from the Economic Policy Institute found CEO compensation has increased by 1,007.5% over the past three decades while workers have seen their pay rise by about 12%.
Lawmakers argue their bill would pressure companies to close the pay gap between CEOs and workers.
If the bill were to become law, companies whose CEOs make more than 50 times the pay of the median worker would face a tax increase. The tax penalties would start at 0.5 percentage point and rise to 5 percentage points for companies that pay their CEOs more than 500 times the pay of the median worker.
The bill would also require private companies with revenues of $100 million or more to disclose their CEO-to-median worker pay ratio. The private companies would then be subject to the same increased tax rates.
Lawmakers say the bill would put pressure on companies to close the pay gap between CEOs and workers.
“The last time I checked, corporations got by just fine when CEOs made a million bucks a year—one-tenth of what they make now. All around the world today, large, successful businesses manage to be profitable while treating their workers with dignity and not handing out obscene pay packages to their CEOs. If America’s corporate boards can’t understand the absurdity of paying their CEO friends—in one year—more than their workers will earn in a lifetime, then the Tax Excessive CEO Pay Act will help them figure it out,” said Sanders.