(The Center Square) – The AFL-CIO tracks the highest paid CEOs in the country on its website.
The labor union cited Blackstone Inc. CEO Stephen Schwarzman as the highest paid top executive in the country in 2022 with pay of $253 million.
The backlash against CEO high pay became a taxpayer issue when the city of San Francisco voters approved a tax in 2020 on private companies that it deemed paid its top executives too much money.
The city’s Overpaid Executive Tax brought in $206 million in 2023, the first year it was collected.
Portland’s city council approved an ordinance in 2016 that taxes private businesses with CEOs it has deemed to be overpaid. That ordinance was added to the city’s existing Business License Tax and taxes a publicly traded company if the CEO makes more than a 100:1 ratio compared to the median worker’s compensation.
Last November, a group of Democratic politicians led by U.S. Rep. Alexandria Ocasio-Cortez of New York introduced the Curtailing Executive Overcompensation Act that would also tax companies with CEOs deemed to have “excessive” salaries. The bill was referred to the Committee on Finance in November and no action has been taken on it.
Most proponents of the legislation define “excessive” as paying a CEO at least a 50-to-1 ratio disparity when compared to the median worker pay.
“Year after year, superrich CEOs extract massive pay raises for themselves while many of the workers who keep their companies growing scrimp to make ends meet,” said U.S. Sen. Sheldon Whitehouse, a Democrat from Rhode Island, in a press release. “There’s no justification for a CEO making hundreds of times what the average worker at their company is earning. It’s a sign of illness in society and a drag on our economy. Congress has to step in and correct the wretched excess of CEO self-dealing.”
The progressive Economic Policy Institute supports policy steps to restrain CEO pay.
“The extreme pay of CEOs is not merely a symbolic issue, it has warped the entire upper end of the labor market and contributed to overall inequality,” Economic Policy Institute’s Josh Bivens wrote in December 2023.
Antony Davies, an economist and a Senior Fellow at the Center for American Culture and Ideas, said in an email to The Center Square that the unintended consequences of such actions to restrain CEO pay “will likely dwarf any increase in tax revenues.”
Davies said that if CEOs can’t avoid these taxes on their pay by shifting compensation to non-taxable forms, they will simply leave the city and take their business with them.
“This will result in significantly reduced tax revenues for the city,” Davies said.
“The bottom line is that CEOs behave just like the rest of us,” Davies said. “When our favorite stores raise their prices too high, we shop elsewhere. When our employers pay us too little, we look for better jobs. And when our local government taxes us too much, we move.”
Davies added: “San Francisco doesn’t have a monopoly on location. If it refuses to offer competitive services at competitive tax rates, CEOs and their businesses will simply leave.”
