Bernie's Tax Excessive CEO Pay Act

I got my first job-- when I was still in high school-- working in a print shop. I started out as a minimum wage worker, making $1.15 an hour. The first time I realized I was, as the president of a division of TimeWarner, making $1,000,000 a year, I was astounded and even confused. I managed to justify making that much money to myself but I was never comfortable about it and it made me eager to retire, not stick around and make even more. I've been very sympathetic with Bernie's campaign plank about eliminating those kinds of salaries for CEOs by taxing the companies that hand them out and yesterday I was happy to see that he had teamed up with Barbara Lee and Rashida Tlaib to introduce the Tax Excessive CEO Pay Act in both House of Congress. This is right from Bernie's platform:

In America today, corporate greed and corruption is destroying the social and economic fabric of our society, where a small group of ultra-wealthy CEOs are making the decisions that increasingly determine our economic, environmental and political future. For too long, these greedy corporate CEOs have rigged the tax code, killed market competition, and crushed the lives and power of workers and communities across America. Year after year we’ve seen wages slashed and thousands of workers laid off, all while the richest corporate CEOs pay themselves huge bonuses. They got away with it through a broken campaign finance system, where a few large campaign donations can get you the ear of any politician.

Now Donald Trump, the most corrupt president in history, has brought this corporate corruption straight into the Oval Office.

Enough is enough. With Bernie’s Corporate Accountability and Democracy Plan, we will give workers an ownership stake in the companies they work for, break up corrupt corporate mergers and monopolies, and finally make corporations pay their fair share. When Bernie is president, we’re going to put an end to the corporate greed ruining our country once and for all.

In America today, corporate greed is destroying the social and economic fabric of our society and rapidly moving our nation into an oligarchy, in which a small handful of multi-billionaires increasingly determine our economic, environmental, and political future.

Today, the richest 10 percent of Americans own an estimated 97 percent of all capital income-- including capital gains, corporate dividends, and interest payments. Since the 2008 Wall Street crash, 49 percent of all new income generated in America has gone to the top 1 percent. The three wealthiest people in our country now own more wealth than the bottom 160 million Americans. And the richest family in America-- the Walton family, which inherited about half of Walmart’s stock-- is worth $200 billion and owns more wealth than the bottom 42 percent of the American people.

While the corporate profits that presently go to a small number of ultra-wealthy families are at or near an all-time high, wages as a percentage of our economy are near an all-time low.

Instead of using their massive profits to benefit workers and our society as a whole, corporate America has pumped over $1 trillion into stock buybacks to reward already-wealthy shareholders and executives since the Trump tax plan was signed into law. Meanwhile, as the very rich become ever richer, the average hourly wage of the American worker has gone up by just 1 percent from where it was 46 years ago, after adjusting for inflation. Since 1982, the Walton family has experienced a more than 10,000 percent increase in its wealth, while the median family in America has less wealth today than it did 37 years ago.

The reality is that today the executives and biggest shareholders of most large, profitable corporations could not give a damn about the working class or the communities in which our corporations operate. Those who control these behemoth corporations have only one allegiance: to the short-term bottom line. What happens to their employees, what happens to the environment, and what happens to the community in which their firms function matters very little. These are not really American companies-- they are companies currently located in America at most, and increasingly aren’t even incorporated here but instead merely selling here. Tomorrow, if the economics made sense to them, they could be located in China-- and already they are incorporating in offshore tax havens like Bermuda and the Cayman Islands to avoid paying U.S. taxes.

This type of greed is not an economic model we should be embracing. We can do better; we must do better.

The establishment tells us there is no alternative to unfettered capitalism, that this is how the system and globalization work and there’s no turning back. They are dead wrong.

The truth is that we can and we must develop new economic models to create jobs and increase wages and productivity across America. Instead of giving huge tax breaks to large corporations that ship our jobs to China and other low-wage countries, we need to give workers an ownership stake in the companies they work for, a say in the decision-making process that impacts their lives, and a fair share of the profits that their work makes possible in the first place.

If workers had ownership stakes in their companies and an equal say on corporate boards:

• Corporations would be far less likely to shut down profitable factories in the United States and move abroad;
• CEOs would not be making over 300 times as much as their average workers; and
• Companies would be far less likely to pollute the communities in which workers live.

The time has come to substantially expand employee ownership in America. Study after study has shown that employee ownership increases employment, increases productivity, increases sales, and increases wages in the United States. This is in large part because employee-owned businesses boost employee morale, dedication, creativity and productivity, because workers share in profits and have more control over their own work lives.

Employees in worker-owned companies are not simply cogs in a machine owned by someone else. They play a central role in determining what the company does and how it is run.

By giving workers seats on corporate boards and a stake in their companies, we can create an economy that works for all of us, not just the 1 percent. Not only are we going to make it much easier to join a union and much harder to misclassify workers through the Workplace Democracy Act and increase the minimum wage to $15 an hour. With this proposal we are going to fundamentally shift the wealth of the economy back into the hands of those who create it.

The bill that Bernie, Rashida Tlaib and Barbara Lee introduced yesterday-- the Tax Excessive CEO Pay Act-- would impose tax penalties on large companies that overpay their top executives at the expense of their employees, in other words, companies that pay their CEO more than 50 times as much as their average employee. It would impose tax penalties that will add 0.5% to the federal corporate income tax rate on companies with gaps of 50 to 1, and increase gradually, topping out at 5% on companies that pay their CEO more than 500 times median worker pay.

The bill will include something like 80% of the S&P 500 companies, who pay their CEOs more than 100 times what their average work gets. They can continue doing it; they'll just be taxed for doing it-- over $17 billion more among those S&P 500 companies, annually. Billionaires called the proposal "extremely unfair."

Mark Gamba is the progressive mayor of Milwaukie, Oregon, the candidate for the sprawling 5th congressional district of that state. Last night he told us that "If I were in Congress already, I would be the next to co-sponsor this important bill. For all the reasons given, extreme inequity is destructive and I would add that the trend of continuing to pay executives exorbitant wages, benefits and bonuses while the working class gets poorer, is also destructive to capitalism. America's economy is powerful BECAUSE of the middle class not in spite of it. If the current trends continue, we will completely hollow out the middle class, thereby eliminating the purchasing power of the vast majority of the population. The rich can only buy so many i-phones. With any luck, this bill will have the desired effect of reducing this inequity, if not, the funds raised can be used to begin to solve some of the many problems that these overpaid CEOs cause with their short term thinking. Housing and day care affordability could be addressed, improved transit could be made free. These are typically three of the largest expenses any family faces, and for many, they eat up their entire paycheck. It is time to reign in runaway capitalism before it destroys our economy and our planet."

Some of the groups that have already endorsed the bill include the AFL-CIO, the Communications Workers of America, the Americans for Democratic Action (ADA), the National Council of Churches, the Campaign for America’s Future,Public Citizen, the SEIU, the Center for Popular Democracy, the International Brotherhood of Teamsters, the Working Families Party, Take On Wall Street, Our Revolution and Social Security Works. This is the letter they sent to Congress, urging other members to sign on:


We write to strongly endorse the “Tax Excessive CEO Pay Act” to be introduced by Senators Bernie Sanders, Congresswoman Barbara Lee, and Congresswoman Rashida Tlaib. We encourage you to become an original co-sponsor of this important legislation, which will be introduced on Wednesday, November 13.

As you well know, while worker wages have largely stagnated, CEO pay has skyrocketed over the past several decades. In the 1950s, CEOs made 20 times more than their median employees. Last year, the average S&P 500 CEO made 287 times their median worker pay.

The more corporations channel into executives’ pockets, the less they have for wages and other investments. By putting a tax penalty on corporations with extreme pay gaps, the bill would give corporations an incentive to narrow their divides by lifting up the bottom and bringing down the top of their pay scale.

The tax would also discourage the outrageous levels of compensation that give executives an incentive to take excessive risks. Wall Street’s reckless “bonus culture” proved a key factor in the 2008 financial crisis. Current executive compensation practices also contribute to short-term decision making that leaves payrolls, employee training, and R&D budgets slashed. Academic research indicates that extreme pay gaps also undermine business effectiveness by lowering employee morale, which in turn, reduces productivity and increases turnover.

Under this bill, the wider a company’s gap between CEO and median worker pay, the higher their federal corporate tax rate. The tax penalties would begin at 0.5 percentage points for companies that pay their top executives between 50 and 100 times more than their typical workers. Companies that pay top executives over 500 times worker pay would face the highest increase in their tax rate, at 5 percentage points.

The bill would raise an estimated $150 billion over 10 years that could be used to reduce inequality. The Institute for Policy Studies looked at the 80 percent of S&P 500 companies with pay ratios of 100 to 1 and higher in 2018. If the bill’s proposed tax penalties had been in place, these firms would’ve owed as much as $17.2 billion more in federal taxes.

Americans across the political spectrum are outraged about today’s extreme pay gaps. A Stanford survey found that 52 percent of Republicans want to see a fixed cap on CEO pay relative to worker pay-- a more radical approach than a tax penalty on large disparities. A new Gallup analysis concludes that a CEO-worker pay gap tax “fits well with existing public opinion” and likely enjoys “majority support.” This bill would encourage corporations to narrow their gaps, reducing poverty and inequality all across the United States, while holding companies with outrageous CEO pay ratios accountable.

We thank Senators Bernie Sanders, Congresswoman Barbara Lee and Congresswoman Rashida Tlaib for introducing the Tax Excessive CEO Pay Act legislation and look forward to working with you to make it law.

First co-sponsor in the Senate: Bernie's dear friend and, hopefully, 2020 running-mate, Elizabeth Warren.

Judging by his excessively and extreme Wall Street-friendly posture and record in Congress, I don't think New Dem Bill Foster is going to rush to sign on as a co-sponsor to this legislation in the House. Rachel Ventura, his progressive challenger, is another matter. She old us today that "If I was in Congress now, or if I am sworn in in 2021, I would support the Excessive CEO PAY CUT ACT. I think we should rename it the 'Excessive CEO Pay Cut Act' act so people know that we've had enough of CEO's making millions of dollars per week while working families scrape by. Members of the United Autoworkers Union stood on the strike line for more than a month while the CEO of that company made $22 million a year. The UAW members that I talked to, some of them were also single mothers, were all making between $17 and $25 an hour while the CEO was making $10,500 per hour. I mean, that's not even close! That means that the CEO is making 420X what the top line worker is making. Teachers in Joliet are getting ready to go out on strike. A first year teacher makes in the neighborhood of $43,000/year and the Superintendent makes close to $250,000 per year in compensation and benefits. What you get is a much closer ratio where the person in charge is making six times more what the lower wage teacher makes. So in addition to the argument that we need to get rid of excessive CEO salaries let me also make the argument that the public sector is so much less extreme in wage gap than the private sector. We need to think about bringing our energy sector into the public sphere instead of the private, saving taxpayers millions!"

This proposal right up Arizona progressive Eva Putzova's alley. It's what she's all about and has a lot to do with exactly why she's running for Congress against "former" Republican, Blue Dog Tom O'Halleran. "My day job," she told us this morning, "is to increase workers' wages and improve working conditions in the restaurant industry. When it comes to pay gap, large restaurant chains are among the worst offenders: McDonalds' CEO makes 2,124 times more than the median McDonalds' worker. This gap is 7.4 times higher than the S&P 500 CEO/worker ratio. We have to start taxing companies that continue to exacerbate inequality and hold them accountable. I will be happy to support Reps. Lee and Tlaib's Tax Excessive CEO Pay Act when elected to Congress."

Another economic royalist, as FDR used to put it, Jim Costa (Blue Dog-CA), is not exactly a booster for Bernie's new bill, despite representing a Central Valley district whose residents would benefit from it in a major way. Costa finally has a progressive opponent, Kim Williams, who noted earlier today, "As Axios reported, more than 53 million people-- 44% of all workers aged 18-64-- are low-wage earners. Rural areas, like mine, are particularly hard hit as medium-sized businesses and worker-protected jobs are in short supply. Many people are forced to work multiple low paying jobs for the corporate giants we all know well. These same corporations write checks every two years to millionaire incumbents like Jim Costa, and they’ve made a healthy return on their investment. We need more representatives to support Sanders, Lee, Tlaib, and the thousands of working class families who have played by the rules and still can’t make it." Please consider tapping on the thermometer above and supporting Williams, Ventura, Putzova and Gamba.