Portland, Oregon Adopts First-of-Its-Kind CEO Pay Ratio Tax on Employers
The Portland, Oregon City Council has passed an ordinance that will impose a tax surcharge on publicly traded companies whose chief executive officers are paid at least 100 times more than the median pay of other company employees. Portland is the first locality in the nation to enact such a requirement.
The law, which passed by a 3-1 vote (with one absence), creates a surtax to the city’s Business License Tax for companies that will be subject to a new Securities and Exchange Commission rule taking effect in January 2017 requiring publicly traded companies to report the ratio of CEO pay to its median employee compensation. The current annual tax rate established by Portland’s Business License Law is 2.2 percent of adjusted net income. For tax years beginning on or after January 1, 2017, a surcharge of 10 percent of base tax liability will be imposed if a covered company reports a pay ratio of at least 100:1 but less than 250:1 between CEO and median employee pay. The surcharge increases to 25 percent of base tax liability if the ratio is 250:1 or greater. The surcharge provision will apply to all publicly traded companies otherwise covered by the city’s Business License Tax, regardless of whether the company is headquartered in Portland.