Why has the United States become so much more unequal over the last four decades? Any number of factors have been driving our increased inequality. But no single factor may have been more significant than the behavior of the modern American corporation.
Corporations are contributing to inequality on two fronts. On the one hand, they’re systematically depressing incomes for average Americans, via everything from outsourcing to pension cuts. On the other, they’re just as systematically stuffing the pockets of America’s executive class.
These two vile sets of behaviors are relentlessly reinforcing each other. Outrageously huge rewards give corporate executives an incentive to behave outrageously, to squeeze their workers at every opportunity.
So how can we fight these corporate pay outrages? We change the incentive structure. We start giving Corporate America reason to narrow income divides, not stretch them ever wider. New legislation just introduced in Congress does just that.
The legislation — the Tax Excessive CEO Pay Act — raises the corporate tax rate on companies that pay their top executives over 50 times more than what they pay their most typical workers. The wider the pay-gap multiple over 50 times, the higher the tax rate.
Not that long ago, no one could have possibly dreamed that this sort of tax penalty would be so necessary. In mid-20th century America, CEOs at major U.S. firms seldom made much more than 30 or 40 times average worker pay. Today, by contrast, the nation’s top CEOs average nearly 300 times more. In 2018, a new Institute for Policy Studies report details, 50 top execs grabbed over 1,000 times more.
The proposed Tax Excessive CEO Pay Act carries some heavyweight sponsors. In the Senate, Bernie Sanders (I-Vermont) introduced the legislation November 13, the same day that veteran lawmaker Barbara Lee (D-California) and outspoken first-termer Rashida Tlaib (D-Michigan) introduced the bill in the House. And, on the Senate side, Senator Elizabeth Warren (D-Massachusetts) is co-sponsoring the legislation.
Over two dozen national labor, religious, and policy organizations have already endorsed the new Tax Excessive CEO Pay Act. They range from the AFL-CIO and the National Council of Churches to the Coalition on Human Needs and Public Citizen.
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