Portland City Council is considering raising a tax on corporations that pay outsized CEO salaries — and using some of the revenue to lower taxes on local small businesses.
The council’s Finance and Governance Committee of the Whole took public testimony Oct. 8 on the proposal put forward by District 3 Counselor Angelita Morillo and District 4 Councilor Mitch Green.
They’re calling it the “Fair Share Tax.” It modifies an existing surtax that then-commissioner Steve Novick authored in 2016. A surtax is tax on top of an existing tax. In this case, the existing tax is a 2.6% business license tax levied on net business earnings of more than $100,000 a year in the city. The Novick-sponsored 2016 ordinance applies 25% and 10% surtaxes, raising the rate to 3.25% for corporations where CEOs are paid more than 250 times their median worker pay, and 2.86% for those with CEO pay ratios from 100:1 to 250:1. The surtax only applies to publicly traded corporations, because they’re required under federal securities law to report their CEO-to-median-worker pay ratio.
Morillo and Green are proposing to increase the surtax and also broaden the small business exemption by raising the threshold of earnings from $100,000 to $500,000.
The Fair Share Tax would create five brackets ranging from 3.25% for CEO pay ratios of 50:1 to 75:1, to 15.6% for ratios of 500:1 and above.
Green and Morillo estimate that the ordinance could bring in about $72 million annually. That equates to almost half of the $160 million city budget deficit that was cited as the reason for city worker layoffs this summer.
At the hearing, testimony ran 35 to 4 in favor of the ordinance.
“The city has been facing challenging budget environments, and we as city employees have been fighting for fair compensation,” said City of Portland Professional Workers union treasurer Chris Gustafson, speaking in favor. “It would be thrilling if we could avoid having a third year in a row undergoing a strike authorization vote.”
Those speaking against the ordinance expressed concern about pushing large corporations out of Portland and losing jobs.
But accountant Brian Frank, cofounder of Portland Businesses for All, pointed out in testimony that in order to avoid the tax, corporations would have to cease all sales in Portland, because the tax is based on volume of sales in Portland.
The committee was scheduled to discuss the ordinance again Oct. 15, after this went to press.
