Opinion: Voters want to tax outrageous CEO pay. Are lawmakers listening?

Opinion: Voters want to tax outrageous CEO pay. Are lawmakers listening?

For decades now, I’ve been conducting my own informal survey of American views about CEO pay.

Whenever family, friends, or random strangers ask about my job, I tell them it involves research on executive compensation. Last year, for example, I found that CEOs of America’s 100 largest low-wage employers made, on average, over 600 times what their median workers made — and often thousands of times more.

Invariably, people see red when I share these numbers. And they often have choice words about the unfairness of it all.

A new poll reinforces my informal findings: Americans across the political spectrum are fed up with overpaid CEOs — and want something done about it.

The Data for Progress survey asked likely voters about one possible congressional action: a tax hike on corporations that pay their CEO at least 50 times more than they pay their median employee.

This policy would give companies with huge internal disparities two choices: narrow their pay gaps or face a bigger IRS bill. A company where half of employees earn less than $60,000, for instance, would have to limit CEO compensation to no more than $3 million or raise worker pay to avoid higher taxes. In 2022, the average S&P 500 CEO pay hit $16.7 million.

The survey results? Overall, 80 percent of participants support the idea, including large majorities in every political group (89 percent of Democrats, 77 percent of independents and 71 percent of Republicans). In swing states, 83 percent of likely voters gave it a thumbs up.

The Data for Progress results are consistent with two previous surveys on a much tougher policy approach: an outright cap on executive pay relative to worker pay. Those polls — one by Just Capital and another by the Stanford Business School — found broad public enthusiasm for such caps, including among a majority of Republicans.

Using tax policy to narrow corporate pay gaps has been gaining momentum for nearly a decade. Two U.S. cities — San Francisco and Portland — adopted such taxes years ago. At the federal level, the 100-member Congressional Progressive Caucus recently endorsed the proposal and three Senate committee chairs have expressed support as well.

With such broad popularity, penalties for huge CEO-worker pay gaps should be squarely in the mix in the big tax fight of 2025, when several provisions in the 2017 Trump-GOP tax cuts for corporations and the rich are set to expire. This will be a key opportunity to push bold tax code changes that advance an equitable and sustainable economy and reject the disastrous “trickle-down” paradigm.

Back in 2017, advocates of the Republican tax law promised that a central pillar of that plan — slashing the corporate tax rate from 35 percent to 21 percent — would lead to more and better jobs for ordinary workers. Instead, almost all benefits of this rate cut, a group of academic and government analysts recently found, have flowed to wealthy shareholders and executives. Employees who fall below their company’s top 10 percent tier have seen no trickle-down wage boosts whatsoever.

Reversing this failed policy should be part of any deal coming out of the 2025 tax negotiations. And the chances of that happening — especially if Congress remains narrowly divided — would arguably be higher if a corporate tax rate hike were combined with the broadly popular idea of taxing big CEO-worker pay gaps.

CEO-worker pay gap taxes might even win over some pro-business reformers. Extensive academic research has shown that extreme wage disparities are bad for business because they undermine employee morale and productivity.

The problem of overpaid CEOs and underpaid workers is not going to go away on its own — and is likely to get worse. Equilar analysis of preliminary data for 2023 finds that big company CEO pay rose 11.3 percent last year, while median worker pay at these firms dropped by 9.3 percent.

It’s time for responsible government action on a problem that’s had Americans’ blood boiling for far too long.

Sarah Anderson directs the Global Economy Project and co-edits Inequality.org at the Institute for Policy Studies. She’s the author of the IPS Executive Excess report series on CEO pay.

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