Portland Adopts Surcharge on C.E.O. Pay in Move vs. Income Inequality.

Portland Adopts Surcharge on C.E.O. Pay in Move vs. Income Inequality.

Moving to address income inequality on a local level, the City Council in Portland, Ore., voted on Wednesday to impose a surtax on companies whose chief executives earn more than 100 times the median pay of their rank-and-file workers.

The surcharge, which Portland officials said is the first in the nation linked to chief executives’ pay, would be added to the city’s business tax for those companies that exceed the pay threshold. Currently, roughly 550 companies that generate significant income on sales in Portland pay the business tax.

Under the new rule, companies must pay an additional 10 percent in taxes if their chief executives receive compensation greater than 100 times the median pay of all their employees. Companies with pay ratios greater than 250 times the median will face a 25 percent surcharge.

The tax will take effect next year, after the Securities and Exchange Commission begins to require public companies to calculate and disclose how their chief executives’ compensation compares with their workers’ median pay. The S.E.C. rule was required under the Dodd-Frank legislation enacted in 2010.

Thomas Piketty, a professor at the Paris School of Economics and an authority on income inequality who wrote “Capital in the Twenty-First Century,” said he favored the Portland tax as a first step.

“This is certainly part of the solution,” Mr. Piketty wrote in an email, “but the tax surcharge needs to be large enough; the threshold ‘100 times’ should be substantially lowered.”

Another supporter of the tax is Charlie Hales, the mayor of Portland.

“Income inequality is real, it is a national problem and the federal government isn’t doing anything about it,” Mr. Hales, a Democrat, said in a telephone interview. “We have a habit of trying things in Portland; maybe they’re not perfect at the first iteration. But local action replicated around the country can start to make a difference.”

Mr. Hales, who did not seek re-election, will leave office at the end of the month.

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