New bill aims to reduce disparity between CEO and employee pay

There could be another tax increase on the way, this one for publicly traded corporations in California.

Senate Bill 1372 targets leaders at corporate companies by raising the corporate income tax. In a 6-2 vote, the bill cleared its first committee on Thursday. The tax rate would be based on how much a CEO makes compared to their average worker.

The disparity between CEO and worker pay has grown substantially over the last 30 years, according to the AFL-CIO's Executive Pay Watch report. In 2012, the average CEO pay in California was $5,054,959, while the median worker pay was $48,029.

"Income Inequality is a huge threat to California's economic growth and instability, and a threat to American democracy," Sen. Mark DeSaulnier, D-Concord, said.

The bill, sponsored by DeSaulnier, would lower taxes for employers with smaller gaps in their CEO and worker pay. Those with a wider gap would have to pay more.

"If the CEO pay is 200 or 300 or 400 times the typical worker, a company's going to pay more tax," former U.S. Secretary of Labor Robert Reich said.

Reich appeared before Thursday's California Senate Governance and Finance Committee hearing to speak in favor of the bill, saying it will restore the middle class.

"Some incentives have got to be built into the system to reduce all of that extraordinary benefit going to the very top," Reich said.

The current corporate tax rate is 8.84 percent. That could jump to as high as 19.5 percent if the bill is approved.

The California Taxpayers Association said it's a bad time to raise the corporate tax.

"We are recovering from a very difficult time in our economic lives and another tax increase just won't help that recovery," California Taxpayers Association Vice President Gina Rodriquez said.

The California Chamber of Commerce has even labeled the bill a job killer.

"Just the threat of such a high corporate tax rate will certainly discourage them from investing in California and we will lose the potential jobs," California Chamber of Commerce Policy Advocate Jennifer Barrera said.

Supporters of SB 1327 said CEO's don't create jobs, it's the customers who do.

The bill still has a long way to go before it reaches the Governor's desk. Since it would raise taxes, it needs a two-thirds majority vote in both chambers.


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