There's an easy way to cap sky-high CEO salaries and limit outrageous pay gaps — and it would actually work
, which would apply graduated corporate-tax increases based on the size of a company's gap between CEO and median worker pay. The tax penalty would kick in at 0.5 percentage points for companies with pay ratios of 50-to-1 or higher and max out at 5 percentage points for ratios above 500-to-1.
This tax reform, despite being a sensible way to encourage narrower pay gaps, is stalled in Congress, along with much of Biden's agenda. But the president does not need to wait for legislation to act. He could wield the power of the public purse by making it hard for companies with huge CEO-worker pay gaps to land lucrative federal contracts. Given the large number of low-wage employers that rely on these contracts, this would be a significant step to close the gap.
In other words, if two similarly qualified companies say they could do a job for $20 million, but company A has a pay gap of 300-to-1 and company B's pay ratio is 75-to-1, company B would get the contract. This would encourage corporations to narrow their pay gaps, ideally by both reining in the top and lifting the bottom of their wage scales.
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