From France, an Unexpected Call for a Ceiling on CEO Pay

We now have, thanks to research like this, more info than ever on the breadth of the pay gaps that divide our workers and top execs. What we can we do with all this new knowledge? We can start placing consequences on it. And that process has already begun.

In Oregon, the city of Portland has had a pay-ratio tax on the books for the past six years. Companies doing business in Portland that have CEO-to-median-worker pay ratios higher than 100-to-1 pay a 10 percent surtax on the city’s annual business license tax. Ratios over 250-to-1 elevate that surtax to 25 percent. In 2019, the last pre-pandemic year, Portland’s pay-ratio surtax raised nearly $5 million.

Voters in San Francisco established a similar pay-ratio levy in 2020. This Bay Area tax kicks in on companies with top execs making over 100 times the median pay of their local workers. Corporations with ratios over 600-to-1 can pay up to 2.4 percent of their payroll in tax. In 2022, city officials estimate, this pay-ratio levy could add as much as $140 million to San Francisco’s general fund.

Various federal proposals follow the same pattern, most notably the Tax Excessive CEO Pay Act introduced last year. This legislation places escalating tax-rate hikes on corporations with pay gaps wider than 50-to-1. If this legislation had been law in 2020, Walmart would have faced an additional $859 million in taxes.

Other recent proposals at the state and federal level have tied executive-worker pay ratios to government contracts and subsidies. Their basic thrust: to direct government subsidies only to businesses that keep executive-worker pay gaps within reasonable limits and steer government contracts to firms that keep their executive pay within a modest multiple of worker pay.

Elsewhere in the world, progressive political leaders have picked up on a broader income-cap proposal that President Franklin Roosevelt put before Congress in 1942. FDR called back then for a 100 percent tax on individual income over $25,000, just over $440,000 in today’s dollars.

FDR didn’t get his 100 percent top rate, but Congress did place a 94 percent top rate on income over $200,000. That top tax rate would hover around 90 percent until the mid-1960s, years that saw the United States give birth to the first mass middle class in world history.

Five years ago, in the 2017 French presidential election, the veteran radical pol Jean-Luc Mélenchon fell just shy of reaching the voting’s final round. His signature proposal: an FDR-like 100 percent tax rate on income over 400,000 euros, then the equivalent of about $430,000. In this year’s French presidential election, Mélenchon once again fell just short of making the final pairing. He ran this time on a platform that called for limiting a corporation’s maximum pay to 20 times its lowest.

Emmanuel Macron’s nod to the notion of a ceiling on executive pay, in the campaigning since the presidential voting’s first round, no doubt reflects Macron’s bid for the support of voters who opted for Mélenchon in the initial balloting. No independent French political observers seriously believe that Macron will actually advance anything close to Mélenchon’s income cap.

But Macron, if he does face some legislative prodding, might well move forward with less ambitious proposals for taming runaway CEO compensation. He might, for instance, back measures that link corporate tax rates or government contracting decisions to CEO-worker pay ratios. And any progress on this pay ratio-related front, no matter how modest, would help ever more people better understand that no force of nature leaves some of us enormously richer than others. The level of inequality that surrounds us has been and always will be a human construct.

We can choose to be more equal. Struggles around pay ratios can help make these choices much plainer.

This content originally appeared on CounterPunch.org and was authored by Sam Pizzigati.

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