IT’S TIME FOR PENNSYLVANIA TO ENACT CEO PAY RATIO

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Pennsylvania is in the midst of what seems like a never-ending budget crisis based on rising costs for basic services and an unwillingness by our elected legislators to tackle the problem properly. Pennsylvania’s politicians clearly lack the political courage to stand up to special interests and wealthy donors. Instead, they cowtow to the big money power brokers, crafting cushy deals for their friends while leaving vital programs like education, healthcare, and human services dangerously underfunded.

There is a clear disconnect between our Legislature and the hard-working taxpayers who drive the Pennsylvania economy. One of the clearest example of this disconnect is the Legislature’s failure to act as CEO salaries skyrocket while worker wages remain stagnant and benefits are regularly cut in the name of “cost savings.” Although there is a lot of chatter about Pennsylvania’s corporate tax rate being the highest in the nation, the reality is that an overwhelming majority of the businesses in Pennsylvania don’t pay the tax at all because of loopholes in the system specifically designed to benefit them. Not only is this scheme blatantly unfair to working families, it is also horrible economic policy for Pennsylvania.

If elected to the State Senate, I plan to push for Pennsylvania to join the growing number of states adopting “CEO Pay Ratio” to level the playing field and ease the burden on every man, woman, and child in the state. The concept of CEO Pay Ratio is simple. The tax rate for corporations is determined not by politicians making backroom deals, but by a fair, easy to understand formula that ties the rate to how much the company’s CEO earns each year.

Not only is this scheme blatantly unfair to working families, it is also horrible economic policy for Pennsylvania.

For example, if ABC Widget Corp. pays its CEO $6 million per year and pays their employees an average of $60,000 per year, the company’s CEO Pay Ratio would be 100:1. If the average employee salary is only $30,000, then the CEO Pay Ratio is 200:1.

One functioning example of CEO Pay Ratio is the city of Portland, Oregon. Under the Portland law, public companies with a CEO Pay Ratio of 100:1 pay an additional 10% in taxes, while public companies with a CEO Pay Ratio of 250:1 must pay an additional 25% in corporate taxes. Variations of these rules exist in Rhode Island and Minnesota. Another possible model is to impose a set financial penalty for a company with an unreasonably high CEO Pay Ratio.

While the specifics will obviously need to be crafted with the appropriate stakeholders, the idea of large corporations paying their employees fairly and proportionately to high-paid executives is something we should all be able to get behind and support. CEO Pay Ratio will also level the playing field for true small businesses to thrive and survive when large corporations roll into town and take over, putting local entrepreneurs out of business.

The revenue generated from a CEO Pay Ratio rule could be used to fund public education (which also lowers local property taxes) and increase job training and placement services to ensure our children and grandchildren don’t need to move six states away to find a family-sustaining job.

It’s time to stop letting the foxes in Harrisburg run the henhouse, which is why I will push for CEO Pay Ratio if elected the next State Senator for the 16th District of Pennsylvania.

-Mark

Blog PostMark PinsleyComment