Senator Mark DeSaulnier (D-Concord) has announced amendments to SB 1372 to address the growing disparity between CEO and worker pay, while also providing funding to retain California companies and attract new businesses.
SB 1372 creates a new corporate tax table that decreases taxes for employers with sensible differences between CEO and worker pay, and increases taxes on companies with large disparities between CEO and worker pay. New amendments to SB 1372 require excess funds generated by this new corporate tax table be used by the Governor’s Office of Business and Economic Development (Go-Biz) to offer tax credits through the California Competes Tax Credit to companies that want to come to or stay and grow in California. These funds would only be available to companies in which the CEO makes no more than 100 times of the median worker salary.
“Instead or rewarding companies with outrageous CEO compensation, most of which are from out of state, we should be reinvesting in California companies with fair pay for workers,” Senator DeSaulnier said. “SB 1372 generates funding aimed directly at retaining California companies or attracting new businesses with reasonable CEO pay to our state. We can stimulate economic development in California’s communities, while also promoting fair pay for workers. California needs to focus on restoring the true engine of our economy—the middle class.”
Under SB 1372, taxes would decrease for companies in which the CEO makes no more than 100 times of the median salary of workers. Taxes would increase on companies that pay CEO’s 100-400 times more than workers.
The Franchise Tax Board (FTB) estimates the corporate tax table established under SB 1372 would result in revenue gains of $100 million in 2014-15, $320 million in 2015-16, and $340 million in 2016-17.
Each year, 25% of the revenue generated shall be reserved for small businesses. Additionally, no more than 20% of the funding available through the tax credit may be allocated to any one taxpayer in a single year. The California Competes Tax Credit prioritizes businesses in areas of high unemployment and poverty.
According to the AFL-CIO’s Executive Pay watch, in 2012, the CEO of an S&P 500 Index company received an average compensation of 354 times more than the median US worker. In 2012, the average CEO pay in California was $5,054,959, while the median worker pay in California was $48,029.