Should Portland amend Business License Law Code to include new compensation ratios and increase the CEO Pay Ratio Surtax and gross receipts exemption amount (amend Code…

The City of Portland ordains. Section 1. The Council finds: The K-shaped recovery from the COVID-19 pandemic has seen an acceleration of historical trends in income inequality and wealth concentration. Federal Reserve data shows a near doubling in the share of total U.S. wealth captured by the top 0.1 percent from 1989 to 2025. In the last quarter of 2025, a new record high of 14.5 percent of total wealth was owned by the top 0.1 percent, while the top 1 percent of households owned 31.8 percent, the same as the collective wealth of the bottom 90 percent. An Oxfam report from January 2026 found that billionaire wealth grew three times faster in the first year of President Trump's second term than in the previous five years. The report also notes: "[d]ata from 136 countries confirms that as economic resources become more unequally distributed, so too does political power."Income inequality has also increased considerably, in large part due to rising incomes from financial holdings and stagnant wages for lower- and middle-income workers (see, e.g., Cunningham 2026). The Congressional Budget Office reports that from 1979 to 2022 the share of income going to the top 1 percent of households doubled from 7 percent to 14 percent, after accounting for taxes and transfers. Over the same period, the share going to the middle 60 percent declined from 51 percent to 45 percent (p. 34).A 2025 report by the Economic Policy Institute found that CEO compensation grew by 1,094 percent from 1978 to 2024, outpacing the 357 percent growth in compensation observed across all earners in the top 0.1 percent, and dwarfing the 26 percent growth in compensation of a typical worker over the same period. In 2025, and driven by Tesla CEO Elon Musk's trillion dollar pay package, the average CEO for an S&P 500 corporation earned a record-breaking $340 million, 5,387 times their median employees' pay. Even without the Tesla deal, the average CEO compensation was up 21 percent from 2024 to 2025, with a CEO-to-median worker pay ratio of 312:1 (AFL-CIO).Research suggests that rising executive compensation at large corporations is substantially due to rent extraction from consumers, rank-and-file workers, and shareholders, rather than executives improving firm performance (see, e.g., Gale and Thorpe 2024). Share repurchases (stock buybacks) are partly responsible for inflated executive pay as well as lost middle-class jobs as large corporations have shifted from a ‘retain and reinvest' to a ‘downsize and distribute' orientation (Lazonick 2015). Buybacks by S&P 500 firms are expected to have topped $1 trillion in 2025, nearly quadruple the amount from 2020, according to S&P Global.In 2015, the U.S. Securities and Exchange Commission (SEC) adopted a rule requiring public companies to disclose the ratio of the compensation of their chief executive officers to the median compensation of their employees. This disclosure has helped shareholders better evaluate chief executive officer compensation based on performance, and it has offered local, state, and federal governments an opportunity to craft policy tools to address the increasing gap between executive and worker pay.In 2016, Council authorized a surtax on the Business License Tax for publicly traded companies subject to SEC disclosure rules if the subject company reports that the ratio of compensation of its chief executive officer to median worker is equal to or greater than 100:1 (Ordinance No. 188129).In April 2026, Council voted unanimously (11 ayes, 1 absent) to increase the Business License Tax exemption threshold from $50,000 in gross receipts to $75,000 in tax year 2026 and to $100,000 in tax year 2027 (Ordinance 192163).Still, business dynamism is weaker now than it was 50 years ago. According to the Census Bureau's Business Dynamics Statistics, startups made up 13.7 percent of all U.S. firms in 1978 but only 9.1 percent in 2023. In the Portland MSA the decline has been even steeper, from 15.5 percent to 8.3 percent (see Hathaway and Litan 2014 for further discussion). The Institute for Local Self-Reliance argues that this is due in part to an unlevel competitive playing field between small businesses and large corporations (Mitchell 2016).The Oregon Prosperity Council's "Recommendations for Oregon's Long-Term Competitiveness & Prosperity" emphasizes tax relief for small businesses and a broader need to support business growth and economic competitiveness. Washington's and Seattle's Business and Occupation Tax exemption thresholds are substantially higher ($250,000 and $2 million, respectively) than Portland's threshold of $100,000 for tax year 2027, putting Portland at a competitive disadvantage.The 2017 Tax Cuts and Jobs Act cut the top federal tax rate on corporations to its lowest level in over 70 years while increasing the federal tax for smaller corporations (see Kennedy et al. 2024 Appendix). The Institute on Taxation and Economic Policy estimates that the effective tax rate of large, profitable corporations for which data is available dropped from 22.0 percent to 12.8 percent as a result of President Trump's tax cuts, saving these businesses billions of dollars every year.The City continues to face historic revenue shortfalls that must be addressed to retain and eventually expand the level of service Portlanders expect without losing capacity or exacerbating the affordability crisis across our region. In 2025, the City faced a $93 million discretionary budget gap driven by new and rising costs and reductions in revenue. In 2026, the City faced a $160 million discretionary budget gap that was driven by rising costs and further reductions in revenue.Corporate income taxes like the Business License Tax have been found by economists primarily to impact shareholders and corporate executives, making them relatively progressive. Kennedy et al. (2024), for instance, find that 51 percent of the benefits from President Trump's Tax Cuts and Jobs Act flowed to owners, another 10 percent flowed to just the top five executives, and no benefit went to the bottom 90 percent of workers (see also Risch 2024). By increasing effective rates on larger corporations with wide CEO-to-worker pay gaps, the Pay Ratio Surtax focuses the progressivity of the Business License tax further on the specific beneficiaries of historical trends in wealth and income inequality.NOW, THEREFORE, the Council directs: Amend City Code Sections 7.02.400 and 7.02.500 as shown in Exhibit A. The Bureau of Revenue and Financial Services and the City Budget Office will prepare necessary adjustments to the Revenue Division' s budget in the Fiscal Year 2027-28 budget process.