Senate Democrats Introduce a Tax on Wealth Inequality It's a sin tax on companies who pay people million dollar salaries.

Sen. Nguyen is sponsoring a bill that basically puts a sin tax on companies who pay employees millions of dollars. Lester Black

On Tuesday, Washington State Senator Joe Nguyen dropped a bill that would impose an excise tax on employers who pay their employees one million dollars or more.

Washington has fewer than 3,300 employees who earn over a million dollars, according to an analysis of compensation data from the Washington State Employment Security Department by the Economic Opportunity Institute (EOI), a think tank based in Seattle. That's not a lot of people, but taxing their employers for paying them so much would make a big impact. If this tax were in place last year, for instance, it would have generated $226 million.

Look at all these multimillionaires. Economic Opportunity Institute

The progressive "excess compensation tax" would require employers to pay a 5 percent tax on compensation between $1 million and $5 million, a 7.5 percent tax on compensation between $5 million and $10 million, and a 10 percent tax on compensation over $10 million. I'm using the word "compensation" here instead of "wages," which would make more emotional sense, because "compensation" includes salaries, bonuses, stock awards, and all that other stuff you get if you work for a big corporation.

The $226 million generated from the tax would more than cover the $200 million housing advocates are seeking to fund the Housing Trust Fund, which the state uses to build affordable housing. It would put a dent in the $400 million needed to cover special education costs this year. Name your crisis that absolutely must be addressed this session—the mental health crisis, the education funding crisis, the higher education funding crisis, the housing and homelessness crisis, and the various environmental crises—and this money from the wealthiest companies could go to pay for some of that.

As it should. Creating millionaires at the expense of middle class and poor people is bad for our health, and we should discourage that kind of behavior. Several studies show a relationship between high income inequality and lower life expectancy. "The effect of inequality was statistically significant, equivalent to a difference of about 11 days of life between high- and low-inequality places," according to Margot Sanger-Katz in the New York Times.

"The researchers think that places where wealthy residents can essentially buy their way out of social services may have less cohesion and investment in things like education and public health that we know affect life span," Sanger-Katz continues. "There is also literature suggesting that it’s stressful to live among people who are wealthier than you. That stress may translate into mental health problems or cardiac disease for lower-income residents of unequal places."

If we have a sin tax on alcohol and tobacco because drinking and smoking is bad for our health, then we should have a sin tax on companies who pay people millions of dollars because millionaires are bad for our health.

The city of Portland, Ore. was the first place in the country to enact a similar law three years ago. The City Council imposed a tax on companies whose CEOs earned more than 100 times the median pay of their average workers. According to the Oregonian, the city scooped up at least $3.5 million last year.

This year Washington State House Rep. Beth Doglio (D-Olympia) introduced a bill that more closely aligns with the Portland legislation. Her bill would fund the Working Families Tax Credit by introducing a surcharge on publicly traded companies whose CEO made more than 50 times the pay of the average worker at that company. The bill died in the Finance committee earlier this session.

Since the Portland CEO tax passed, lawmakers in California, Connecticut, Rhode Island, Illinois, Massachusetts, and Minnesota have introduced similar bills.

But I can't find another state or municipality considering an excess compensation tax structured like Nguyen's bill, which is kind of exciting. (If I'm wrong about this, please let me know in the comments!)

Unlike the proposed capital gains tax, the excess compensation tax doesn't risk "a significant or sustainable legal challenge," according to John Burbank, executive director of EOI. That's because it's an excise tax on companies, and Washington has lots of legal precedent for imposing excise taxes on companies (e.g. the business-and-occupations tax).

Though the tax might not be in danger of specious legal challenges from the Freedom Foundation, Sen. Nguyen expects the tax to be vilified as a statewide head tax, despite the fact that the two taxes are completely different.

But the potential fight doesn't faze Nguyen. "People are going to vilify this, but people are dying, our schools are underfunded. If folks want to vilify us for doing that, then I welcome that challenge. This is justice for our people," he said.

"We're just trying to make things fair," Nguyen added. "They're already getting a shit-ton of money from the Tax Cuts and Jobs Act. This is peanuts compared to what they're getting from that."

As the Senate weighs how they want to pay for programs in desperate need of funding, plus measures that would help relieve the tax burden on poor people, introducing the bill allows Nguyen and other progressive senators to push the conversation about taxing wealthy people and corporations to the left. If tons of people start flooding the phone lines with calls in support of the excess compensation tax, conservative Dems might be more willing to back the capital gains tax, which is a nice thought. But, with large Democratic majorities in both the House and the Senate, there's no reason we can't live in a world with a capital gains tax and an excess compensation tax. If you want to live in that world, a world where we can actually pay for the things we need in a way that doesn't excessively burden poor people, then you might take five minutes of your lunch break and ask your senator to back both taxes on the wealthy.