HR Policy Association

Progressive Democrat Touts Pay Ratio Tax as Solution to Income Inequality

Published on: May 18, 2018

Topics: Employment Law, Executive Pay Plan Design

Rep. Keith Ellison (D-MN) issued a report on 225 Fortune 500 companies titled “Rewarding or Hoarding? An Examination of Pay Ratios Revealed by Dodd-Frank,” which embraces a corporate tax increase based on pay ratio on the theory that companies could hire many median-paid employees for the total reported CEO pay.

Among Ellison's solutions: Giving preference in awarding government contracts to companies with lower pay ratios. 

The approach has been introduced in several states and is in effect in Portland, Oregon.  These tax policies subject companies to higher tax rates or surtax penalties based on their disclosed pay ratio.  

Why this is noteworthy:  Rep. Ellison is a key Democrat on the House Financial Services Committee, and, depending on the outcome of the November elections, his focus on the pay ratio could, at a minimum be a spur to a Democratic House highlighting pay disparities, while laying the groundwork for future legislative action.