Portland Punishes Pay-Gap Extremes: Imposes 25% Tax On Firms With High Relative CEO Pay

Soaring income inequality - among all the 'inequalities' - has become the bete noire of many in America as the financialization of society has led to the rich getting richer at the expense of the masses.

And now, for the first time, micro details about income inequality are being disclosed, as The Economist reports, according to new filings submitted to the Securities and Exchange Commission (SEC), America’s largest publicly listed firms (those worth at least $1bn) on average paid their chief executives 130 times more than their typical workers in 2017.

The figures are being disclosed for the first time as a result of the Dodd-Frank act, a financial-reform law with a provision requiring listed firms to report the annual compensation of their chief executives, that of their median employees, and the ratio of the two.

So far, interest in the pay ratios among investors has been fairly limited... 

However, liberal politicians have proved more enthusiastic, and so following Seattle's decision to "take their fair share" with a 'head tax' in an effort to redistribute corporate wealth to the homeless (to 'solve' the housing affordability crisis), lawmakers in Portland, Oregon have decided to take on the income inequality miasma - by charging a business-tax on firms with extreme CEO-to-worker pay ratios:

  • 10% Tax on firms with a CEO-to-Worker ratio over 100-to-1; and a

  • 25% Tax on firms with a CEO-to-Worker ratio over 250-to-1.

As The Economist notes, lawmakers in at least six states, including California, Illinois and Massachusetts, have considered policies of this sort, too.

But, it appears, the 0.01% have a plan already in place...

A law such as this would be impossible to implement if the pay-ratio rule is scrapped.

In October, in response to an executive order from President Donald Trump to review America’s financial regulation, the Treasury called on Congress to do just that, writing that the information is “not material to the reasonable investor for making investment decisions”.

Of course, as with the recent exodus from many high-tax states, implementation of this kind of relative success punitive taxation will do nothing but reduce overall tax revenues as firms (and CEOs) leave en masse.