To tackle income inequality, tax companies that overpay CEOs and underpay workers

While the wealth of each of our families was very different, we both grew up during a time when most families could live comfortably on what they took home after working a 40-hour-a-week job. In those days, a middle-class salary could cover a household’s needs. And the company boss didn’t make that much more than the people who worked for them.

Today, the paycheck from the same middle-class jobs that supported a family when we were growing up can barely make ends meet.

Here’s the stark reality: Since the 1970s, the pay of the average employee has remained stagnant, while the pay to CEOs skyrocketed by 940 percent. The gap between rich and poor, between wealthy CEOs and the average worker, keeps widening.

Trickle-down economics, the idea that cutting taxes for the rich and for wealthy corporations will raise the economic status of low- and middle-income workers, hasn’t panned out. America’s super rich are richer than ever. Corporate profits are at record highs. At the end of 2017, the top one percent of Americans held 38.6 percent of the nation’s total wealth. Meanwhile, 53 million American workers earn barely enough to live on. Here in California, those same low-income workers are the very families we see being increasingly forced to live in their cars and turn to the local church for a hot meal.

Let’s compare the pay of those 53 million workers to the pay of the executives of the companies those workers very likely work for. In 2018, a typical U.S. CEO pocketed about $17.2 million a year. Their average employee made about $56,000 – nearly 300 times less pay than the CEO. In many companies, the pay gap is far more egregious. The difference between what the CEO of McDonald’s took home was 2,124 times higher than the pay of the median McDonald’s worker, while Gap’s CEO pocketed 3,566 times more than Gap’s employees and Walmart’s CEO got nearly 1,200 times more that Walmart’s employees.

In 2018, the Disney Company reported nearly $13 billion in profit and gave CEO Bob Iger a compensation package that totaled about 1,400 times more than the median pay of Disney’s regular employees.

Income inequality hasn’t been this extreme since the Gilded Age, and California is no exception. The Golden State has the fourth biggest gap between rich and poor.

Which is why we’re advocating for California’s Senate Bill 37, “Corporate Fair Share for California and Californians.” SB 37 is an innovative attempt to address income inequality through a tax structure that incentivizes corporations to shrink the gap between CEO pay and average worker pay.

Under SB 37, large corporations that do business in California would face a tax increase of 2 percent to 6 percent, depending on the difference between what the CEO is paid and the pay of their average worker. If compensation among executives is 100 or more times higher than what the average employee makes, the corporation gets a tax increase. And that tax increase keeps going up on those corporations that have the most extreme inequality – the ones that pay their CEOs a thousand times or more than what they pay the average employee.

Designing a tax structure that rewards big corporations for paying their employees better tells companies that California is serious about addressing income inequality. And raising taxes on the most egregious corporations makes sense because when a business refuses to pay workers a fair share, it puts a burden on all of us.

Families that take home corporate paychecks that aren’t enough to make ends meet rely on the rest of us to cover the costs of services like health care, food assistance, and more – like the Disney employees who lived in their cars while Disney posted record profits.

Traditionally, taxes have been used to raise revenues and level the playing field by funding services and resources for the common good. But taxes also can be employed to punish bad behavior and incentivize model citizenship.

The message of SB 37 is simple: Greed is never good. Equality and fairness are patriotic.

And the message to big corporations: Stop underpaying your employees and overpaying your wealthy CEOs. Help us bring an end to this plutocracy.

Let’s shift some of the profits to the people who are doing the work, not just to those at the top.

This story was originally published January 17, 2020 at 6:00 AM.