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The City of Portland is stepping forward with a first in the nation — a CEO tax. And it wants other cities to follow in its footsteps.

“There are about 540 publicly traded companies that do enough business in Portland that are subject to our local business income tax on profits attributed to Portland,” said Portland City Commissioner (council member) Steve Novick.

“What our bureau of revenue will do is look at the list of publicly-traded companies doing business in Portland, look at the Securities and Exchange Commission list (detailing incomes of CEOs and workers), and if the ratio is more than 100-1, then they will apply a 10 percent surcharge to the tax they would normally pay,” he said. “If the ratio is more than 250-1, they will apply a 25 percent surcharge.”

Portland mayor’s “hard message” for cities like Seattle

Starting in 2017, the SEC will begin requiring companies to disclose the ratio between their CEO’s compensation and their employee’s pay. Portland will use that list to implement its own CEO tax.

Even if a company is not based in Portland, it will still have to pay the tax if they do enough business in town to pay the local income tax. Novick points to Walmart and General Electric, for example. Now Portland wants other cities to implement their own CEO tax. But will it make a difference?

“Well if only Portland does it, then it won’t,” Novick said. “But if a lot other jurisdictions follow us, which I think might happen … then eventually the shareholders of America will have to recognize that the after-tax profits they get to divvy up is going down because they are paying their CEOs these outrageous amounts. And they will reduce their CEO’s pay and increase the typical worker’s pay.”

“The explosions of CEO pay is a relatively recent phenomenon,” he said. “It’s been going on 30 years, but when you look at the 1960s when the American economy was the envy of the world, the typical CEO made about 20 times what a typical worker made.”

The new CEO tax won’t be effective until 2017. Which means the taxes won’t be collected until 2018.

A Seattle CEO tax?

Portland wants other cities to follow, and if modeled after the Rose City’s legislation, companies such as Walmart, etc. could be paying more around the country, even in the Puget Sound region. But in the Emerald City, there’s a tech boom. Seattle is filled with high-paid tech employees, and company executives are no exception.

“In Portland, we know that at least 70 percent of people support the idea,” Novick said.

But could that support translate to Seattle?

, the city’s top paid CEOs in 2015 were all from tech-related companies, aside from Starbucks.

• Dara Khosrowshahi, Expedia, $94,603,552 (cash pay of $3,750,000), 18,730 employees
• John Legere, T-Mobile, $24,457,987 (cash pay of $10,745,459), 50,000 employees
• Howard Schultz, Starbucks, $20,091,353 (cash pay of $5,505,000), 238,000 employees
• Satya Nadella, Microsoft, $18,294,270 (cash pay of $5,520,000), 118,000 employees
• Spencer Rascoff, Zillow Group, $16,881,235 (cash pay of $655,000), 2,204 employees

That’s just the top five. And of course, what matters is the ratio between the executive’s pay and the typical worker. So imagine the difference between Schultz’s $5.5 million cash pay, compared to the average barista. Consider Microsoft. CEO Nadella takes in $5.5 million in cash pay, but tech employees are known to earn higher pay. The median entry level pay for a software engineer in Seattle is around $93,984, .

Balancing power

³ÉÈËXÕ¾ Radio’s Dave Ross is quick to point out that labor markets often languish because of oversupply. And also, won’t companies just want to leave town if Portland puts a CEO tax in place?

“It’s not just a matter of a changing job market, it’s a matter of raw power,” Novick argued. “The richest 1 percent, especially the richest 1/10^th of 1 percent, have far more wealth and income and power than they did 40 years ago. In fact, if you just restore the income share of the richest 1 percent to what it was in 1976, you would have enough money to give everybody in America in the bottom 90 percent a 20 percent raise”

“What’s happened is partly a change in culture — 50 years ago, people would think it’s unseemly for a CEO to make hundreds of times what the typical worker made,” he said. “But it’s also a reflection of the reduced power of workers, which has gone a long with the reduction in unionization – starting in the ’70s companies realized they could break unions without really a penalty.”

And does Novick think companies will leave Portland?

“They have not,” he said. “And that would be kind of silly. Ours is a tax that applies to their profits. And if they are still making profits in Portland, why would they close up shop?