Taxing Outrageous CEO Pay

Rep. Aaron Regunberg has introduced legislation that would impose a surtax on companies that pay their chief executive officers more than 100 times what they pay their median worker.

The bill (2017-H 5141) would establish a surtax on the business corporation tax for publicly traded corporations subject to U.S. Securities and Exchange Commission disclosure and reporting requirements, if a subject corporation reports that the ratio of compensation of its chief executive officer to median worker is equal to or greater than 100 to one.

“It would take an average Walmart employee 1,133 years to earn what Walmart's CEO makes in a year,” said Representative Regunberg. “The ratio of chief executive pay compared with the earnings of median workers has increased from a multiple of 20 in 1965 to almost 300 in 2013. And it's getting worse. In 2015, the average compensation for the 200 highest-paid executives at public companies in the United States was $19.3 million, up from $9.6 million five years earlier.”

In 2015, the U.S. Securities and Exchange Commission adopted a rule requiring public companies to disclose the ratio of the compensation of its chief executive officer to the median compensation of its employees.

According to a report from the Economic Policy institute, income inequality has risen in every state since the 1970s and in many states is up in the post–Great Recession era. In 24 states, the top 1 percent captured at least half of all income growth between 2009 and 2013, and in 15 of those states, the top 1 percent captured all income growth.

“The spectacular concentration of income and wealth among the top 0.1 percent hurts our economy and corrupts our democracy,” said Representative Regunberg. “That’s why I’m proud today to introduce legislation directly targeting this inequality, by placing a surtax on publicly traded companies whose CEOs earn more than 100 times their average employees. Nobody needs to receive more than what their employee would earn in a century. And if a corporation doesn’t want to pay the surtax, they don't need to — they can simply lower their outrageous CEO compensation, or increase their employees’ salaries.”