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California Bill Will Punish CEOs Making Salaries That Are Much More Than Those Of Regular Employees

The growing wage gap between CEOs and employees may get addressed in a new bill out of California.

Bill SB1372 would essentially put a high tax rate in place for companies whose CEOs make more than 100 times the average wage of their employees. Lawmakers backing this initiative hope that this will help temper large companies with “out of whack” CEO salaries.

"The issue of widening inequality of income and wealth and opportunity and political power is one that the United States is now becoming aware of because things are getting so out of kilter," said former U.S. Labor Secretary Robert Reich to the Senate Governance and Finance Committee.

In addition to punishing companies with large wage gaps between CEOs and employees, the bill would seek to reward companies that already have smaller wage gaps by lowering their corporate tax rate. The corporate tax rate, which is currently 8.84% for all corporations, would either go down to 7% for responsible companies and up to 13% for companies with larger wage gaps. According to reports, the average CEO makes up to 354 times the normal wage for a regular employee, as of the latest findings.

So far, the bill has been backed by some prominent Democratic lawmakers while some noted Republicans already voted against it.

“They are the innovation behind the business, and without them we don’t have anything,” said Palmdale Republican Senator Steve Knight, arguing that the bill would actually discourage business owners to help their companies grow.

Still, the bill has already been cleared through an initial committee, and now it is headed to the Appropriations Committee. Reich says that in addition to putting a stop to large wage gaps, the new bill will ultimately strengthen the economy.

“How do you run an economy where the middle class and the poor don’t have enough money to buy everything the economy is capable of producing?” said Reich. “That’s one of the biggest reasons why this [economic] recovery has been so anemic.”


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