A trio of progressive lawmakers took aim at companies with large pay gaps between the c-suite and the rank-and-file with a proposal to tax corporate America when executive pay far exceeds a typical employees' wages.
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The “Tax Excessive CEO Pay Act” — proposed by Democratic Michigan Rep. Rashida Tlaib, and senators Bernie Sanders, a Vermont independent, and Barbara Lee, a California Democrat, would impose a tax penalty on companies where CEO pay is more than 50 times what the median worker pay rate is. The tax penalty would begin at 0.5 percentage points and rise to 5 percentage points – the higher the pay gap, the higher the penalty.
“Last time I checked, corporations got by just fine when CEOs made a million bucks a year – one-tenth of what they make now,” Sanders said in a statement.
According to a press release from Sanders’ office, the average McDonald’s employee would have to work for more than 2,000 years to earn what the company’s CEO was paid last year, while a retail worker at Gap would have to work more than 3,000 years to reach the pay rate of former CEO Art Peck.
The measure would raise about $150 billion over the course of 10 years if current compensation trends continue, the lawmakers said. They also cited a report by the Institute for Policy Studies that concluded 80 percent of companies on the S&P 500 paid their CEOs 100 times more than their median worker.
The bill comes at a time when the business community has become increasingly wary of the slew of soak-the-rich tax proposals. Many, like Microsoft co-founder Bill Gates, are in favor of progressive tax structures, but have raised concerns that imposing measures like a wealth tax would discourage investment and innovation. Both Sanders and Massachusetts Sen. Elizabeth Warren have proposed wealth taxes.
A handful have also pushed back against rhetoric vilifying the nation’s wealthiest individuals, many of whom — they argue — have worked hard to create a product of value and also give back regularly through philanthropic efforts.
Sanders, who is a millionaire himself, has come under fire for suggesting billionaires should not exist.
Meanwhile, Warren is taking her battle with billionaires head on by responding directly to criticism from billionaire businessmen throughout the past week, including Gates, investor Leon Cooperman and JPMorgan CEO Jamie Dimon.