Sen. Bernie Sanders (I., Vt.), Sen. Elizabeth Warren (D., Mass.) and several Democratic lawmakers re-introduced legislation on Wednesday that would raise taxes on companies that pay their CEOs more than 50 times the pay of a median worker. Sanders unveiled the bill hours before leading a Senate Budget Committee hearing focused on income and wealth inequality.
Sanders invited Amazon CEO Jeff Bezos to testify during the hearing, but Bezos declined. An Amazon (AMZN) worker fighting for a union in Alabama did join the hearing. Sanders accused Bezos of trying to stop workers from forming a union, and blasted him for amassing tens of billions in wealth throughout the pandemic while many of his workers struggled.
"Amazon and Jeff Bezos are not alone. The American people are increasingly disgusted with the corporate greed they're experiencing every single day," said Sanders at the hearing. "They're sick and tired of CEOs that now make 320 times more than their average employees, while at the same time giving themselves big bonuses, golden parachutes and yet they cut back on the healthcare that their workers have."
Sanders pointed to an Economic Policy Institute Study that found CEO compensation grew by 1,167% from 1978 to 2019.
"It has always been true that CEOs make more than their employees, but what has been going on in recent years is totally absurd," said Sanders.
If the Tax Excessive CEO Pay Act were to become law, companies whose CEOs make more than 50 times the pay of the median worker would face a tax increase. On top of the 21% corporate tax rate, the tax penalties would start at 0.5 percentage points and rise to 5 percentage points for companies that pay their CEOs more than 500 times the pay of the median worker. If the company's CEO doesn't make the most money, the ratio would be based on the highest paid employee.
“Corporate executives have padded their pockets with hefty paychecks and over-the-top compensation packages, while American workers, who helped generate record corporate profits, have hardly seen their wages budge,” said Sen. Warren in a press release. “We need to take dramatic steps to address wealth inequality in this country and discouraging massive executive payouts is a good place to start.”
Sanders previously introduced the bill in 2019.
The bill would also require private companies with annual revenues of $100 million or more to disclose their CEO-to-median worker pay ratio. The private companies would then be subject to the same increased tax rates.
According to a report from S&P Global Market Intelligence published in August 2020, Alphabet CEO Sundar Pichai had a total compensation package worth $280.6 million in 2019, netting 1,085 times the median pay range for the average Google employee. The rule requiring public companies to list their chief executives' total annual compensation as a ratio to their workers' median pay took effect jn 2018.
Lawmakers say the bill would put pressure on companies to close the pay gap between CEOs and workers — but if corporate pay patterns continue, would raise $150 billion over 10 years. If the bill would have been in effect last year, the lawmakers say Walmart would have paid up to $854.9 million more in taxes and Home Depot would have paid up to an additional $500.8 million.
In an interview with Yahoo Finance Live, Sen. Mike Braun (R, Ind.) — who sits on the Senate Budget Committee — said the Sanders and Warren plan might not solve the problem.
"It's not the tax rate that's as important as how many loopholes you've got," said Braun. "We ought to look at eliminating all the breaks that most businesses don't have in the first place."
Jessica Smith is chief political correspondent for Yahoo Finance, based in Washington, D.C. Follow her on Twitter at @JessicaASmith8.