Councilor Steve Novick has a renewed plan to solve Portland’s budget woes: tax the rich.

On Thursday, Novick wrote that a tax hike on companies that pay their chief executives vastly more than their rank-and-file workers would be “a way to recall corporate America to its glorious roots.”

“Back in 1965, the American economy completely dominated the world,” he wrote in a city memo shared with OPB. “We had shared and growing prosperity, a thriving middle class, and big company CEOs made only 20 times what the typical worker made.”

Novick hopes to return Portland to that time by expanding a headline-grabbing tax he introduced when he was last on Portland City Council in 2016.

The policy adds to the city’s business license tax — a 2.6% tax on net income of any company that does business in Portland.

Novick’s “pay ratio surcharge” increased a company’s business tax by 10% if it pays its CEO a salary that is 100 times the salary of its median workers. That tax is increased by 25% if the company’s CEO makes 250 times its median workers’ income.

Since 2017, the surcharge has brought in an average of $5 million annually.

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Novick wants to take the tax further: Under his proposal the surcharge would grow to a 50% increase for companies with CEO-to-worker wage ratio of 100-to-1, and 100% for a 250-to-1 ratio. Put differently, 100-to-1 companies would pay 3.9% in business taxes and 250-to-1 companies would pay 5.2%.

For example, a multi-million dollar company that pays $250,000 in business taxes annually — and whose CEO’s salary is 250 times higher than its median employee — would currently pay a $62,500 surcharge.

Under Novick’s increase, the surcharge would be $250,000 — essentially doubling the company’s business tax bill.

Novick estimates this will lead to about $27 million in new revenue each year.

Ditching clean energy tax hike

His proposal comes days after Mayor Keith Wilson released his first proposed budget. Wilson’s budget included cuts to city programs and jobs to make up a $65 million budget deficit, which was caused by a combination of declining tax revenues, inflating costs, and expiring short-term funds.

Novick first tried to address the city’s depleting revenue stream last month, by proposing a rate increase to the Portland Clean Energy Fund tax. That extra revenue, he proposed, could go toward the city’s general fund. That idea didn’t sit well with several city councilors — and Mayor Wilson.

Novick has used this new revenue proposal to change course.

On Thursday, Novick told members of the Portland Clean Energy Community Benefits Fund committee that he’d no longer be pursuing his PCEF tax hike.

Now Novick is supporting a new plan introduced by Councilor Mitch Green earlier this week. Green’s plan would borrow money from the climate fund’s reserves to help fill the city’s budget shortfall — with the promise to repay the loan over a number of years.

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Members of the PCEF committee have raised concerns about how the city, facing another year of budget shortfalls, would be able to pay the loan back. Novick sees his pay ratio surcharge hike as the answer.

“Councilor Green and I agreed that we would pair that borrowing proposal with another revenue proposal: an increase in the ‘CEO pay ratio tax surcharge,’” wrote Novick in a letter sent to the PCEF committee Thursday.

Novick wrote that he and Green have agreed to propose borrowing $10 million from PCEF’s reserves, with the promise to use part of the pay ratio surcharge revenue to pay it back when taxes are collected next year.

Novick suggested that the new revenue source could help backfill other programs that rely on short-term funding streams, like Wilson’s shelter plan.

‘Voluntary tax’ on companies

Portland was the first to adopt this type of business pay ratio tax under Novick’s advocacy in 2016. But now, it’s not alone: In 2020, San Francisco adopted a similar tax, which has generated $100 million annually.

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Novick is prepared for business leaders, who’ve long criticized the city’s growing tax burden on companies, to recoil at the plan.

“Since it is a surcharge on the business license tax, which is a tax on profits, it cannot ‘drive business out of the city,’” Novick wrote in his argument backing the policy. “No company is going to stop doing business in Portland because the amount of profit they make is reduced by 2.6%.”

“It is also a voluntary tax,” he continued. “A company can avoid it by ceasing to pay its CEO an insane amount of money — or increasing its median workers’ pay.”

The revenue proposal will need council approval to advance.

News Source : https://www.opb.org/article/2025/05/08/portland-steve-novick-tax-the-rich/