Tax Law

Portland will tax companies that reward CEOs with disproportionately high pay

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Briefcase of money.

The city of Portland, Oregon, is addressing income inequality by taxing publicly traded companies in the city that pay their chief executives at least 100 times more than the median pay of their workers.

The city council on Wednesday voted to require companies to pay an extra 10 percent in city business license taxes if their CEO compensation is at least 100 times and less than 250 times the median pay of workers. Companies with a pay ratio greater than that amount with have to pay an extra 25 percent in business taxes. and the New York Times have stories on the law, which takes effect with the tax year beginning in 2017, according to its text.

The law relies on a new rule that will require public companies beginning in January to disclose to the Securities and Exchange Commission the difference between CEO compensation and workers’ median pay. The rule was enacted as a result of the Dodd-Frank financial reform legislation.

Outgoing city commissioner Steve Novick, a former environmental lawyer, proposed the idea. His press release is here.

“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,” Novick told the New York Times. “It was the closest thing I’d seen to a tax on inequality itself.”

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