Sanders Proposes CEO Pay Ratio Tax in Wealth Inequality Hearing

March 19, 2021

During a hearing on income inequality that focused on the union organizing campaign at Amazon in Bessemer, Alabama, Senate Budget Committee Chair Bernie Sanders (I-VT) unveiled legislation to increase the corporate tax rate of companies whose top earning executive makes 50 times or more than their median worker.

Amazon was targeted despite aligning itself with Sen. Sanders’ efforts to achieve a $15 minimum wage.  “Amazon brags it pays workers above the minimum wage,” said Ms. Jennifer Bates, a Bessemer Amazon worker who is part of a union organizing push there.  “What they don’t tell you is what those jobs are really like.  And they certainly don’t tell you that they can afford to do much better for their workers.”  Ms. Bates went on to liken Amazon to a “stalker ex” in its efforts to remain union-free. 

Sen. Sanders’ Tax Excessive CEO Pay Act would increase the corporate tax rate in increments based on the company's CEO-to-median-worker pay ratio reported to the SEC.  The corporate tax rate would grow: 

  • +0.5 percentage points for companies whose ratio is more than 50 but not more than 100, 
  • +1 percentage point for companies whose ratio is more than 100 but not more than 200, 
  • +2 percentage points for companies whose ratio is more than 200 but not more than 300, 
  • +3 percentage points for companies whose ratio is more than 300 but not more than 400, 
  • +4 percentage points for companies whose ratio is more than 400 but not more than 500, and 
  • +5 percentage points for companies whose ratio is more than 500.

The legislation would apply to both public and private companies, and extend current pay ratio reporting requirements to private companies with gross receipts of over $100 million. 

At the hearing, the decline of private sector labor unions was held as a chief cause of income inequality.  Former Labor Secretary Robert Reich noted, “In the 1950s we talked about the countervailing power of labor unions to American corporations…there is almost no countervailing power left.”  He went on to say, “Corporations have cut their payrolls by outsourcing abroad, utilizing part-time workers, and shifting to contract workers—all of which further shredded safety nets and undermined workers’ bargaining power.” 

Republicans focused on education reform and policies to help low-wage workers build wealth and lift individuals from poverty.  Several contested the notion that wage and salary income has stagnated. 

Outlook: The hearing marks the first of what will certainly be a number of examples of congressional oversight where large employers are a central focus.