Bernie Sanders is taking aim at highly paid CEOs with a new bill that would tax companies that pay their top executives significantly more than their workers.
Sanders, who chairs the Senate Budget Committee, introduced the Tax Excessive CEO Pay Act this week, which would increase the corporate tax rate by 0.5% for companies reporting a CEO-to-median-worker pay ratio of 50 to 1, and grow to a rate of 5% for companies reporting a ratio of 500 to 1 or higher.
The bill, which Sanders said could raise as much as $150 billion over 10 years, would also work to reduce growing income inequality.
“During the pandemic, millions of people are struggling to put food on the table, [and a] handful of billionaires are becoming much richer,” Sanders said during a Senate hearing Wednesday. “Is that the America that we want? I don’t think so.”
CEO pay surged by 14% in 2019 (the most recent year with data available) and chief executives in the U.S. now earn 320 times as much as a typical worker.
“Incredibly, if income inequality had remained the same as it was in 1975, the average worker in America would be making $42,000 more than he or she is earning,” said Sanders. “Instead, as the number of billionaires explodes, the average worker in America is now making $32 a week less than he or she made 48 years ago.”
Between 1978 to 2019, CEO pay (including compensation from stock awards when vested and stock options when cashed in) grew by 1,167%, During that same period compensation of the typical worker grew by just 13.7%, according to analysis by the Economic Policy Institute.
The rapid growth in compensation, reported EPI, is not the result of increased productivity or the possession of high-demand skills. It comes from CEOs being given the authority to set their own pay and because nearly three-quarters of their pay is stock-related.
“On the worker end, [the shift is] because wages and unions have declined. On the CEO end, it happened because of the shift to stock-based pay. The argument was that stock-based pay would pay for performance, and that has really turned out to be a joke,” said Sarah Anderson, director of the global economy project at the Institute for Policy Studies, during the Senate hearing.
Last year, Walmart’s CEO made $22.1 million while the typical worker earned $22,500, that’s 983 times more. CVS Health Corporation CEO, Karen Lynch, made 790 times the median employees’ pay.
Under the proposed law, Walmart would have paid an extra $855 million more in taxes; Home Depot would have paid $551 million more; and JPMorgan Chase and Nike would have paid over $100 million each.
A 2019 Stanford study found that 86% of Americans believe the CEOs of large, public U.S. companies are overpaid and only 14% do not, the numbers were consistently high across party lines, and household incomes.
The bill, which is co-sponsored by Democratic Senators Elizabeth Warren, Ed Markey and Chris Van Hollen, and Congresswomen Barbara Lee and Rashida Tlaib, will have a difficult time making its way through Congress, where Republicans and moderate Democrats are unlikely to vote for a plan that hikes corporate taxes. It follows an unsuccessful fight by Senate progressives to increase the federal minimum wage from $7.25 per hour to $15 per hour, the first raise since 2009.