Portland Takes Aim at Inequality with CEO Tax

If you’re looking for a city with cutting-edge progressive ideas, take a look at Portland, Oregon. The city recently passed a zoning restriction prohibiting construction or expansion of fossil fuel storage facilities. While public safety is clearly an issue with these facilities, Portland left no doubt about the larger issues that also impacted the decision. Mayor Charlie Hales said: "The leadership on climate and sustainability rests with the cities. The science is real, and the mandate is ours."

If that wasn’t enough, last week the city passed an ordinance that requires corporations operating within the city to pay an additional 10 percent tax if the CEO receives more than 100 times the salary of the lowest paid employee.

The new rule takes advantage of an SEC regulation that requires all corporations to disclose the pay gap between CEO and median worker salaries. Under the rule, companies must pay a 25 percent surcharge if their CEO earns 250 times as much as median worker pay.

As U.S. News reported, CEOs made about 205 times the average worker's wage in 2014, compared with 257 times a year earlier, based on figures compiled by the Associated Press using earnings statistics from the Labor Department.

What, you might ask, connects the SEC rule with the new city ordinance?

As Portland City Commissioner Steve Novick, who proposed the new tax rule, put it: "Income inequality is the greatest threat facing us, second only to climate change." While Novick acknowledges that a tax surcharge is not the only way to deal with inequality, he said he believes "those with the power to take small steps to address this problem should do so."

A similar measure was proposed in California at the state level, but it did not pass the state senate.

While other cities might be fearful that such a regulation might encourage corporations to relocate elsewhere, by fearlessly pressing on with a people-centered agenda, Portland refuses to be ruled by corporate interests, as so many other communities are today.

The city estimates revenues between $2.5 million and 3.5 million from the tax.  Commissioner Novick proposed that the funds be used to deal with homelessness.

The city recently opened a Joint Office for Homeless Services, which has a goal of getting least 4,300 people off the streets and keeping another 5,600 people from becoming homeless.

The estimated annual operating cost for the office is $18.5 million. The city committed $15 million. And revenues from this new tax could potentially close the gap.

With the SEC rule taking effect Jan. 1, it will be interesting to see if other cities follow Portland’s lead. Novick added: "Portland’s new surtax will give companies an incentive to narrow the economic divide within their own firms — by lowering CEO pay and/or by lifting up their workers’ wages. Of course, this reform alone will not close our nation’s economic divide. But it does send a powerful message that our community is ready to take a stand against the extreme inequality that harms all of us."

Image credit: ben_osteen:Flickr Creative Commons