Can a CEO Tax Attack an Inequality? In Portland, North Is Elusive

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To listen to Portland, Oregon, City Commissioner Amanda Fritz pointed out, there is no reason why other cities should not return to Portland in 2016. CEOs paid by any company in Portland are taxed more.

That year the Portland City Council passed a local law paying tax on all local publicly traded companies, if they have a presence in Portland, they are highly paid CEOs. The city defined “excessive pay” as a top executive that is 100 times the average pay for workers. Although Portland officials would not say which companies are paying the tax, citing privacy reasons, it is likely that many large American companies that do business in the city, such as Starbucks and McDonald’s, are supporting the bill.

The marginal tax is making a small but meaningful contribution. The tax raised $ 3.5 million in 2017 and $ 4 million in 2018. The city hopes to collect a comparable amount for the tax year 2019. The fund pays the equivalent of the annual salary of 60 first-year police officers.

“Referring to the amount brought to the city during tax year 2017, we had a lot of help in the first year being over $ 3.5 million,” Fritz said.

But some academics said the tax has no effect on paying city bills and it fails to address the wide funding gap.

“They don’t generate much revenue, they don’t impact the CEO’s salary and they don’t provide much benefit to other workers,” Samuel Brunson, a tax law professor at Loyola University Chicago, said in an email. . “To the extent that cities want to remove inequality, it seems to me that there are more direct and effective ways to do it.”

Still, Portland’s wealth tax is trying to copy some more cities. San Francisco passed its own version of the law, approving a similar surcharge on both public and privately held companies. In July, Seattle passed a related payroll tax, targeting large companies such as Amazon, which is headquartered there. Portland’s law is one of the few blueprints for which other cities may have the effectiveness of money taxes.

Reduce inequality

Portland’s construction of the law was largely driven by Steve Novick, who served on the City Council in 2016 and is now a staff attorney with the state Department of Justice. Novick cited the influential work by the French economist Thomas Piccetti, whose 2013 book, “Capital in the Twenty-First Century,” voiced a clear call for many progressivists. Novick’s original purpose extended beyond just making more money for the city. The aim was to “increase the salaries for front-line workers to companies and reduce compensation for CEOs,” he said. “If enough courts did this, shareholders would say, ‘Wait a minute!”

But lawmakers seeking to mimic Portland quickly find that gaining jurisdiction to embrace the wealth inequality tax is harder than they might think. Ray Mark Desolanier, D-California, who represents Contra Costa County in the San Francisco Bay Area, recently pushed for similar legislation in Congress in September. Earlier, he pushed to pass similar legislation as a representative of the state. But his measures have not gone anywhere so far.

He compares early attempts to control smoking. In 1990, San Luis Obispo became the first city in the world to ban smoking in all public buildings, including California, bars and restaurants.

“I could see that in most urban areas it would happen in five to 10 years,” he said, predicting that taxes on high-paying CEOs would have broad support in Democratic-controlled cities. “It’s not a huge amount of money. But it’s a lot of free money.”

source of funds

Portland targets a company if its top executive makes 100 times the company’s average salary, as measured in “pay ratios”, data filed with the Securities and Exchange Commission in publicly traded corporations. If the company meets the standard, the city gets an additional 10 percent on business taxes already paid.

For example, Oregon’s most famous company, Nike, where the pay ratio is 550-to-1. This means that CEO Mark Parker pays 550 times the median of all workers, which according to Nike, exceeded $ 25,000 per year in 2019.

Of the total compensation, including salary and stock value and other benefits, Parker earned approximately $ 58 million in 2019. Naik is one of the companies that has paid Portland tax; The city declined to say how much Naik paid, citing privacy concerns.

Of the $ 4 million collected in the most recent full tax year 2018, the top 10 corporate payers contributed $ 2.141 million to the city’s coffers, said Thomas Lanom, the city’s deputy chief financial officer.

However, the city would not reveal how much the companies paid, with city officials stating that the largest pay ratio was 3,660 to 1 – a ratio that exactly matches clothing retailer Abercrombie & Fitch, which was revealed in April 2019. Was filed. Seconds. Abercrombie posted a gross profit of $ 2.1 billion in FY 2019 and the same amount the year before.

Novick said the proceeds went to the city’s general fund, which is spent on costs such as the police and fire departments and city parks. The extra cash has allowed the city to spend slightly more on other services.

“Homeless services have been a big part of it,” Novick said. “We can always use more support services for the homeless. We can always use more shelter beds.”

Limited effect

Nevertheless, some economic and tax experts said, the tax, while well-intentioned, does not make a substantial financial difference in those communities. After all, the few million dollars Portland receives represent less than 1 percent of its annual general fund.

Portland State University economics professor Mary King said the amount is so low that her university’s Northwest Economic Research Center in a study in May investigated tax potential revenue sources to increase support for the city’s illiterate population. did not do.

“I don’t know if anyone has analyzed the inequality tax,” King said in an email. “Perhaps others think, as I do, that the effect of the tax is nowhere between and inconspicuous. It is a very small tax, raising very little money, mainly from very large corporations that might have received this attention. Don’t give that they paid for it. “

But it is still valuable for city officials to balance their budgets. When presented with the king’s concerns that the tax is not sufficiently large, Fritz said that every little bit helps and that crores of money come from the city’s cannabis-related businesses.

“Clearly, the professor has never tried to balance the city’s budget or has faced the closure of city workers,” Fritz said.

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