Portland, Ore., city council passed a law Wednesday that will charge businesses a higher tax rate if their chief executive officer gets paid more than 100 times what the average worker at the company does.

Normally, businesses in the city pay a tax of 2.2 per cent of their net income to city hall. But the new law will slap a higher rate on any publicly traded companies in the city if their executive compensation is wildly out of line with what workers at the company earn.

Today, Portland, Oregon, became the first jurisdiction in the US to use the tax code to address outrageous CEO pay. <a href="https://t.co/YVW0r6CUjC">https://t.co/YVW0r6CUjC</a> —@NovickOR

There are currently about 550 publicly traded companies including Wells Fargo, Walmart and General Electric that have operations in the city, and they paid city hall a collective $17.9 million last year in taxes.

But starting in January, an extra 10 per cent tax will be levied if the CEO makes more than 100 times the average salary at the company. If he or she makes more than 250 times, the added tax is even higher — an extra 25 per cent.

"When I first read about the idea of applying a higher tax rate to companies with extreme ratios of CEO pay to typical worker pay, I thought it was a fascinating idea," said Commissioner Steve Novick, who championed the bill after seeing similar efforts in Arizona and California. "[It was] the closest thing I'd seen to a tax on inequality itself."

It's expected that the move could bring in as much as an additional $3.5 million annually, money that would be earmarked to help combat homelessness in the city.