An effort to stop outrageous CEO pay by Senator Mark DeSaulnier (D-Concord) and Loni Hancock (D-Oakland) passed the Senate Governance and Finance Committee today.
SB 1372 creates a new corporate tax table that decreases taxes for employers with reasonable differences between CEO and worker pay, and increases taxes on companies with large disparities between CEO and worker pay.
“History has taught us that the gross disparity between CEO and worker pay is a direct threat to American democracy,” Senator DeSaulnier said. “The difference between CEO and worker pay has sky rocketed over the past few decades—it is unsustainable and a danger to our society. We must focus on restoring the middle class and stop fueling excessive income inequality.”
“This bill begins to address rising income inequality,” Senator Hancock said. “Virtually all of the economic gains of the last several decades have gone to the very few at the top, while hard-working families struggle to hold their own. This inequity is now recognized nationally as a threat to the middle class, and ultimately, to the future of American democracy. Our bill is a start toward creating incentives for ethical and responsible corporate behavior that respects the contributions of all its workers and employees.”
“This growing divergence between CEO pay and that of the typical American worker is not just wildly unfair. It is also bad for the economy,” Former United States Secretary of Labor Robert Reich said. “It means most workers these days lack the purchasing power to buy what the economy is capable of producing—contributing to the slowest recovery on record. Meanwhile, CEOs and other top executives use their fortunes to fuel speculative booms followed by busts.”
“There’s no excuse for a company to lavish its CEO and top executives with tens of millions of dollars they use to by second mansions and yachts while the company’s workers languish below the poverty line,” said Art Pulaski, chief officer of the California Labor Federation. “SB 1372 is a common-sense proposal to rein in out-of-control CEO pay. It provides incentive for corporations to act responsibly. It’s a step in the right direction to address income inequality. And most importantly, it restores balance and fairness to California’s economy.”
Under SB 1372, taxes would decrease for companies in which the CEO makes no more than 100 times of the average salary of workers. Taxes would increase on companies that pay CEO’s 100-400 times more than workers.
According to the AFL-CIO’s Executive Pay watch, in 2012, the CEO of an S&P 500 Index company received an average compensation of 354 times more than the median US worker.
In 2012, the average CEO pay in California was $5,054,959, while the median worker pay in California was $48,029.
Additionally, SB 1372 imposes a penalty on corporations that shift their employment practices to contract employees.
Here is a look at the Bill in full:
LEGISLATIVE COUNSEL’S DIGEST
Vote: 2/3 Appropriation: NO Fiscal Committee: YES Local Program: NO
The people of the State of California do enact as follows:
Section 23151 of the Revenue and Taxation Code is amended to read:
(a) With the exception of banks and financial corporations, every corporation doing business within the limits of this state and not expressly exempted from taxation by the provisions of the Constitution of this state or by this part, shall annually pay to the state, for the privilege of exercising its corporate franchises within this state, a tax according to or measured by its net income, to be computed at the rate of 7.6 percent upon the basis of its net income for the next preceding income year, or if greater, the minimum tax specified in Section 23153.
|If the compensation ratio is:||The applicable tax rate is:|
|Over zero but not over 25||7% upon the basis of net income|
|Over 25 but not over 50||7.5% upon the basis of net income|
|Over 50 but not over 100||8% upon the basis of net income|
|Over 100 but not over 150||9% upon the basis of net income|
|Over 150 but not over 200||9.5% upon the basis of net income|
|Over 200 but not over 250||10% upon the basis of net income|
|Over 250 but not over 300||11% upon the basis of net income|
|Over 300 but not over 400||12% upon the basis of net income|
|Over 400||13% upon the basis of net income|
(ii)“Contracted full-time employee” means an individual engaged by the taxpayer to provide a specific set of services established pursuant to the terms and conditions of a written employment contract that delineates the length of employment, the salary and bonuses (if any) to be paid, and the benefits that accrue to that individual.
This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.