The City Council of Portland, Oregon passed a new surtax on companies whose CEOs make significantly more than their employees. The tax is the first of its kind and designed to discourage income inequality.
Introduced by outgoing Democratic Commissioner Steve Novick of Portland, the new rule will amend the city's already existing business tax, adding a 10 percent surtax on businesses whose CEO makes more than 100 times the median pay of the company's employees.
If the CEO's pay exceeds 250 times more than the median pay of their employees, their business will be hit with a 25 percent surtax. The rule will be applicable to roughly 550 companies that currently pay Portland's business tax.
A 2014 study conducted by the Economic Policy Institute found that the average U.S. CEO made 300 times more than their employees in 2013, The New York Times reports.
On Dec. 7, the city council passed the new rule by a vote of three to one. City officials project that the new surtax could raise $2.5 million a year. Novick, who lost reelection in November, has stated his hope that the new tax revenue will be used to help the city's homeless.
"This is as close as I've ever (come) to a tax on inequality itself," Novick said, according to OregonLive.
The one dissenting vote was cast by Commissioner Dan Saltzman, who stated "I don't believe this is the right time, the right place or the right reason to address this."
Professor Thomas Piketty of the Paris School of Economics, an advocate against income inequality, praised Novick's new rule but asserted that it does not go far enough.
"This is certainly part of the solution," Piketty told the Times in an email. "But the tax surcharge needs to be large enough; the threshold '100 times' should be substantially lowered."
Democratic Mayor Charlie Hales of Portland also praised the new surtax, calling for other cities around the U.S. to follow suit.
"Income inequality is real, it is a national problem and the federal government isn't doing anything about it," Hales said. "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."
The Portland Business Alliance, comprised of 1,850 local companies, has protested Novick's new rule since its inception.
"We see it as an empty gesture," Portland Business Alliance President Sandra McDonough said. "We think they'd be far better off trying to work with business leaders to create more jobs that will lift people up and improve incomes."
McDonough asserted that the City Council of Portland was punishing publicly traded companies because they are "an easy group to pick on."