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Portland, Ore. will levy first-of-its-kind CEO tax

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Portland, Ore. will be come the first jurisdiction in the United States to levy a new tax on companies if their chief executives make much more than their average workers following a city council vote on Wednesday.

{mosads}The new law, which will take effect in January, will add a 10 percent city surtax to the tax a business owes the city each year if its chief executive officer makes more than 100 times the median worker’s wage. If the CEO makes more than 250 times the median worker’s wage, the surtax would jump to 25 percent.

The city’s revenue department says more than 500 publicly traded companies that do business in the city will be subject to the new surtax if their CEOs make enough. Companies like Wells Fargo, Walmart and General Electric all fall in the surtax bucket, which the city says will generate at least $2.5 million in revenue in its first year.

The tax is meant to address income inequality, said Steve Novick, the Portland city commissioner who sponsored the bill.

“When I first read about the idea of applying a higher tax rate to companies with extreme ratios of CEO pay to typical worker pay, I thought it was a fascinating idea — the closest thing I’d seen to a tax on inequality itself,” Novick said in a statement hailing the measure’s passage.

Novick cited economist Thomas Piketty, who concluded exorbitant CEO pay contributes to widespread income inequality. Piketty told The New York Times he favors Portland’s new tax.

Novick, who lost a Democratic primary to now-Sen. Jeff Merkley (D) in 2008, is leaving Portland’s city council after losing his re-election bid this year. Portland Mayor Charlie Hales, who is also leaving office at the end of the year, cast the deciding vote in favor of the new tax.

Business groups oppose the measure, saying it won’t fall evenly across impacted businesses. Beginning in 2017, publicly traded companies will have to report the ratio of executive compensation to median worker’s pay under a 2015 rule adopted by the Securities and Exchange Commission.

“At the end of the day, this is an empty gesture that will do little to address the issue they say they are trying to impact — pay equity. A better approach for the city would be to work with business leaders on a strategy to grow and retain family-wage jobs in our city,” said Sandra McDonough, president of the Portland Business Alliance.

A similar tax was proposed in California’s state legislature in 2014, though that measure failed.

 

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