Despite the popular revolt which seemed to characterize the 2016 elections, it seems to me as if some of you still just don’t get it. And by “you” in this case, I mean the city council in Portland, Oregon. You see, guys, the idea is to encourage companies to grow and hire more people. It’s not to drive them away. And yet we see new laws being passed such as this.
The city of Portland, Oregon, is imposing a surtax on companies whose CEOs earn more than 100 times the median pay of their lower-wage workers.
Companies will see a 10 percent increase on their tax rate if the CEO makes 100 times the average employee and a 25 percent increase if they make 250 times the average salary, The New York Times reported.
The new law, which passed 3-1 in the city council, is estimated to generate about $2.5 to $3.5 million per year, which will be used to address income inequality on a local level.
On “Your World” today, Portland City Commissioner Steve Novick said that aside from climate change, extreme economic inequality is the greatest problem of our time.
So if the company’s CEO earns “too much money” in the opinion of the city council, they will tax not the executive, but the entire company, making it less profitable. And given the margins that most operations work under, if you slice 25% off the top they’re going to be in the red pretty quickly. Now, we’re talking about Portland here, so such a law probably won’t bite too hard into the owners of various artisanal cheese sheds, sidewalk spinach smoothie stands and hand blown glass bong shops. But if there are any seriously large corporations around which are capable of generating significant revenue and employing a lot of workers, they will probably be watching this law very closely.
What is the median wage of “lower-wage workers” these days? The most recent national median wage figure is around $52K (which works out to a bit shy of $25 per hour) but that’s for “households” not individuals. Also, that’s for everyone in the country, including management and higher earners. For the lower end, manual labor folks bringing in a single paycheck it’s a lot lower than that. But let’s say for a moment that it’s roughly fifteen bucks an hour. (Fight for Fifteen, anyone?) That means the most the CEO of the company could be earning is around three million per year before taking a 10% hit to their bottom line. If they earn $7.5M it’s a 25% bite.
Just over the border from Oregon you can find a lot of offices for Boeing. Their CEO, James McNerney, had a compensation package last year of nearly $20M, and that’s not even close to being one of the biggest paydays for CEOs out there. If you suddenly whacked Boeing with a 25% surtax they would shut down their offices and move to South Carolina so fast that you’d hear a booming sound from the air rushing in to fill the vacuum where their office buildings used to be. And all of their workers would either flee the area with them or be on the unemployment line. Unemployed people can’t afford a lot of artisanal cheese every week, so the effect on the ground spreads outward.
This isn’t how you build an economy, guys. It’s how you crater one. No wonder you’re so proud of the phrase, Keep Portland Weird. Put down the bong, folks. You’re supposed to be creating jobs and wealth.