Major players in the Capitol Hill budget debate are bogged down on the US corporate tax rate.
Chairman of the Senate Budget Committee Bernie SandersBernie SandersPoll: 73 percent of Democratic voters would consider voting Biden in the primary Overnight Defense 2024: The US launches another air strike in Somalia | Added amendment to extend Pentagon’s withdrawal period to NDAA | 2. US State Department official conducts nuclear talks with Russia US launch second attack in Somalia in the week MORE (I-Vt.) Wants this rate to rise from the current 21 percent 35 percent, the corporate tax rate before the 2017 Republican tax cuts. President BidenJoe BidenTrump welcomes the Arizona Senate for consideration at the Phoenix rally, and criticizes the Republican governor for focusing resistance to tax hike on changing capital gains. Biden heckled: “This is not a Trump rally. Make them scream MORE suggested raising the current rate to 28 percent. It is. Joe ManchinJoe ManchinWhy Biden’s Home Office Won’t Shut Down Oil & Gas Overnight: Senate Panel Promotes Controversial Candidate For Public Land | Nevada Democrat Unveils Bill Requiring Federal Agencies to Develop Fire Management Plan | NJ Requires Public Water Systems to Replace Lead Pipes in 10 Years Transit Finance, Broadband Brakes Infrastructure Agreements MORE (DW.Va.) has its sweet spot on. set 25 percent.
These percentage point differences are important – especially since legislators are under pressure to generate enough revenue to cover the full cost of an ambitious spending plan.
Manchin’s proposal would bring in about $ 300 billion less than Biden’s, a revenue gap significantly higher than the price tags for White House priorities, which range from universal paid family and sick leave to universal pre-K.
Aside from arm wrestling, how could all the players here resolve their differences? You could round off a corporate tax rate hike with a surcharge on CEO salary tax – an additional levy for companies that absurdly pay their top managers more than their typical workers.
This approach would have two attractive selling points for Manchin and other moderate dems.
First, a CEO salary premium would be widespread because overpaid CEOs are incredibly unpopular. An overwhelming one 86 percent of Americans believe that executives in large US companies make way too much money, according to a Stanford poll.
That sentiment could be even stronger in Manchin’s West Virginia, where big pharma CEOs have made fortunes flooding communities with opioids. Three drug distributors – McKesson, Cardinal Health, and Amerisourcebergen – are before legal proceedings about their role in the state’s devastating search rates.
All of these companies paid their top managers more than $ 14 million in 2020. The median income in West Virginia is only $ 26,480.
Across the country, Americans from across the political spectrum have advocated much tougher policies to tackle excessive executive pay. Pollsters at Stanford have found, for example, 52 percent of Republicans, 64 percent of Independents, and 66 percent of Democrats are in favor of a fixed cap on CEO salaries relative to employee wages.
A CEO salary increase would also directly address the global competitiveness of US companies.
Some and other moderate lawmakers have raised concerns that US companies have a higher tax burden than their foreign competitors. But US corporations only have a higher tax rate than their competitors on paper. In real life, US corporations pay heavily due to massive loopholes less taxes as a percentage of GDP than a company in any other G7 nation.
Moderate Democrats eager to improve corporate competitiveness have a more promising option. They could incentivize US companies to cut CEO salaries.
American top managers today earn an average of eight times as much as their Japanese counterparts, three times as much as French CEOs and twice as much as British and German CEOs. Willis Towers Watson dates Show.
This executive excess puts US companies at a disadvantage worldwide. in the to learn after this to learn, correlates exceptionally high CEO salaries with mediocre financial performance.
For companies with overpaid executives and underpaid employees, the problem is even greater. A 2018 Studied at Harvard Business School School, found, for example, that such differences increase employee dissatisfaction and turnover and decrease sales.
Corporate boards of directors have proven unable to mend our ingrained, highly ineffective corporate compensation structure. In fact, my research during the pandemic shows that more than the half America’s 100 largest low-wage employers have moved executive bonus goal posts or otherwise manipulated pay rules to raise CEO salaries while their workers have suffered. The case for Congressional action on the CEO pay front could hardly be stronger.
So how could a CEO pay a premium?
Sanders has legislated that Excessive Tax Payments Actthat could easily be customized for this purpose. With this approach, companies with a pay ratio of less than 50 to 1 between their highest paid manager and their average worker wage would not owe a premium. Others would face graduated tax rate increases depending on the size of their pay gap.
Both Amazon and Walmart, for example, awarded their highest paid executive in 2020 more than 1,000 times as much as their typical workers. If there had been a salary increase for CEOs last year, these companies would have to pay more than $ 200 million more for every percentage point in their tax rate.
Combining a flat rate hike with a CEO salary increase would send a strong message: all large profitable companies will pay their fair share of much-needed public investment, and those who contribute most to inequality will pay even more.
Sarah Anderson leads the Global Economy Project and is co-editor of Inequality.org at the Institute for Policy Studies.