Revenue from the new tax, which seeks to address income inequality, is intended to be used to pay for programs for homeless people

This article is more than 3 years old

This article is more than 3 years old

The Portland, Oregon, city council has voted to pass a first-of-its-kind measure that would levy a tax on public companies whose CEO-to-workers pay ratio is more than 100-1.

Portland to vote on taxing companies if CEO earns 100 times more than staff Read more

The new tax, which seeks to address income inequality, was voted in 3-1 by the council on Wednesday. It increases corporate income tax by 10% if a company’s CEO has a salary ratio of above 100-1, and by 25% if the CEO has a ratio of 250-1 or more.

Officials expect that the measure will raise $2.5m a year from January 2018, with former environmental lawyer Steve Novick, the city commissioner who proposed the measure, saying that the revenue is intended to be used to pay for programs for homeless people.

There are around 540 publicly traded companies that do enough business in Portland to be subject to the business income tax under current law, Novick said. It is unclear how many of those have CEO-to-worker pay ratios that would make them subject to the increased surcharge.

Novick said he had decided to come up with a measure to address the problems of income inequality while reading French economist Thomas Piketty’s book Capital.

He was also inspired by a similar measure that was proposed in 2015 in the California senate, which did not receive enough votes to make a change in the state tax code.

“I’m hoping we start getting calls from cities, counties and states,” Novick said, “and a year from now many other jurisdictions will have done the same thing.”

Sandra McDonough, the president and CEO of the Portland Business Alliance, a pro-business group, said that she felt there was “a bit of a media stunt going on”.

“We think it’s going to do very little to address the issue they claim they are trying to have an impact on, which is income inequality,” she said. “Our belief is that if the city truly wanted to address that issue then they should be focusing on working with businesses to grow quality jobs that will improve family income.”

“I don’t really think you’re going to see actions by corporations based on this,” she added.