Companies with large pay disparities between their executives and workers would face a bigger tax bill under new proposed legislation.
The Curtailing Executive Overcompensation (CEO) Act (S. 3176), introduced by Senate Budget Committee Chair Sheldon Whitehouse, D-R.I., would impose an excise tax on all public and private companies that have a pay disparity of at least 50 to 1 between their CEO and median worker and have over $100 million in gross receipts and $10 million in payroll.
“There’s no justification for a CEO making hundreds of times what the average worker at their company is earning. It’s a sign of illness in society and a drag on our economy. Congress has to step in and correct the wretched excess of CEO self-dealing,” Whitehouse said in a November 2 release.
The proposed excise tax, cosponsored by Senate Finance Committee member Elizabeth Warren, D-Mass., and Sen. Jeff Merkley, D-Ore., would be limited to 1 percent of a company’s gross receipts and imposed at a rate proportional to the executive’s entire compensation package.
The lawmakers noted that executive pay has increased by more than 1,209 percent since 1978, while the same period saw only an estimated 15 percent increase in workers’ earnings — despite economic productivity outpacing workers’ wages by more than four times. They highlighted that the average CEO made 308 times what the average worker earned last year.
If it had been in effect in 2022, the CEO Act would have raised over $10.1 billion from just the top 100 U.S. companies, the lawmakers said.
The CEO Act is receiving bicameral support, with Reps. Alexandria Ocasio-Cortez, D-N.Y., and Barbara Lee, D-Calif., introducing the companion bill in the House.
“Right now, the average CEO makes in one day what the average worker makes in 10 months,” Lee said in the release. “After decades of this extreme, corrosive economic inequality, workers across corporate America are standing up and using their power to fight for greater equity. It’s only fair that we in Congress fight just as hard as those on the ground.”
According to the release, the CEO Act builds on the efforts of unions striking for better pay and benefits while decrying the massive growth of CEO pay — most notably the United Auto Workers' strike.
“The UAW strike showed that Americans overwhelmingly support closing the cavernous gap between CEO and worker pay,” Ocasio-Cortez said, adding that the CEO Act would encourage “fairer pay structures within companies and penalize those who increase income inequality.”
The CEO Act has already received support from over 23 organizations, including the UAW, the Office of Investment for the AFL-CIO, the Communications Workers of America, Americans for Financial Reform Education Fund, and the Global Economy Project at the Institute for Policy Studies.
“The bill is an effective response to public outrage over extreme pay gaps that are unfair to workers — and bad for business, bad for our economy, and bad for our democracy,” according to Sarah Anderson of the Global Economy Project, who said the change in pay structure would also help generate significant new revenue for vital public investments.