Portland votes to tax companies with high-paid CEOs...
Steve Novick's CEO tax wins close vote, putting Portland on world map
By Jessica Floum on December 07, 2016 at 6:42 PM, updated December 08, 2016 at 12:37 PM.
In a move that's drawn international headlines, Portland will launch a first-of-its-kind tax on public companies that pay their chief executives vastly more than they pay an average worker.
Portland City Council approved the controversial plan 3-1 Wednesday, making a statement about growing income disparity in the United States while giving Commissioner Steve Novick a legacy piece in his final weeks in City Hall.
The tax targets publicly traded companies whose chief executives report salaries at least 100 times higher than the salary of a median worker. Officials expect to raise $2.5 million a year starting in January 2018, with Novick hoping the money will help pay for homeless services.
"This is as close as I've ever (come) to a tax on inequality itself," said Novick, the first incumbent tossed from city council in 24 years after an upset loss to housing activist Chloe Eudaly last month.
Novick said he also hopes the tax might discourage companies -- well beyond Portland -- from paying disproportionate salaries to their CEOs. He cited French economist Thomas Piketty, who calls escalating pay for top executives a major cause of the consolidation of wealth among the world's top 1 percent of earners.
A similar measure, proposed by the California Senate in 2014, served as his inspiration, Novick said. The tax relies on compensation data the federal Securities and Exchange Commission will report beginning next year.
Mayor Charlie Hales thanked Novick before casting the decisive third vote, joining Commissioner Amanda Fritz in saying yes.
"It falls to cities to do creative, progressive policymaking," Hales said, "and this is exactly what this is."
Commissioner Dan Saltzman cast the lone vote against the proposal. Commissioner Nick Fish was absent, but his chief of staff, Sonia Schmanski, said he also would have voted no.
Saltzman said he didn't think this was the "right time" to pass this kind of tax increase. He should wait for a "true emergency." He pointed to 2003, when City Council hiked business license fees to raise $20 million for Portland Public Schools.
"I don't believe this is the right time, the right place or the right reason to address this," Saltzman said.
Under Novick's tax plan, a company with a CEO-to-worker ratio of at least 100-to-1 will pay a surcharge equal to 10 percent of the amount it pays for Portland's business tax. A company with a 250-to-1 ratio or greater would pay a 25 percent surcharge.
If a company ordinarily owes $1 million in taxes to Portland, it would have to pay an additional $100,000 or $250,000.
Novick estimates there are more than 500 publicly traded companies in Portland that will be subject to the tax.
The Portland Business Alliance has opposed the measure since Novick first floated it last summer, while he was still battling Eudaly. Novick, at the time, took the unusual step of agreeing to schedule a vote until after the fall election.
Marion Haynes, the business group's lobbyist and vice president for economic development, said Novick's plan will fail at addressing income inequality.
Haynes argued tax policy should not rely on the federal oversight reports because, she said, the federal rule is designed to give companies flexibility in how they calculate their compensation ratio and therefore won't provide the best data.
Haynes would not say why the tax would be ineffective or how the numbers might be misused.
"This is not something that can be dealt with at a local level," Haynes said.
-- Jessica Floum