Sanders Proposes Corporate Tax to Address Pay Gap at Big Companies

Senator Bernie Sanders of Vermont proposed a new corporate tax on Monday that would penalize some of the country’s largest companies if they did not narrow the gap between what they pay their chief executives and what they pay their workers.

The proposal is the latest measure from Mr. Sanders aimed at reducing income equality — a pillar of his campaign for the Democratic nomination for president.

It is also the latest example of the commitment by Mr. Sanders and his leading progressive rival, Senator Elizabeth Warren of Massachusetts, to use America’s tax system to address the wide gulf between ordinary Americans and the rich.

“The American people are sick and tired of corporate C.E.O.s who now make 300 times more than their average employees, while they give themselves huge bonuses and cut back on the health care and pension benefits of their employees,” Mr. Sanders said in a statement. “They want corporations to invest in their workers, not just dividends, stock buybacks and outrageous compensation packages to their executives.”

Mr. Sanders’s proposal would impose tax rate increases on companies whose chief executives make at least 50 times what their typical workers earn. The tax would apply to all private and publicly held corporations with annual revenue of more than $100 million, the Sanders campaign said.

The tax penalties would begin at half a percentage point for companies that compensate their highest-paid employees between 50 and 100 times as much as their typical workers, then escalate as the pay gap increases. The biggest penalty — 5 percentage points — would apply to companies that pay their top executives more than 500 times what they pay a typical worker.

Mr. Sanders’s campaign said that if current pay patterns continued, the plan would raise about $150 billion over the next decade; the revenue would be used to pay for a plan he released earlier this month to eliminate an estimated $81 billion in existing medical debt. He followed that three days later by proposing an annual tax on the fortunes of the richest Americans, an idea that Ms. Warren has made a centerpiece of her presidential bid.

The tax plans the two candidates have proposed would need to be passed by Congress to become law, an unlikely scenario if Republicans retain control of the Senate.

Together, Ms. Warren and Mr. Sanders have used the 2020 Democratic primary to offer up a substantial rethinking of the federal government’s approach to taxation that would shift more of the burden of paying for government toward the wealthy.

“At a time of massive income and wealth inequality, the American people are demanding that large, profitable corporations pay their fair share of taxes,” Mr. Sanders said in his statement on his corporate tax proposal. “It is time to send a message to corporate America: If you do not end your greed and corruption, we will end it for you.”

Ms. Warren also wants to change how the country’s most profitable corporations are taxed in order to ensure that they are paying their “fair share.” In April, she proposed a new tax on corporations that report more than $100 million in profits.

Under that proposal, both private and public companies would pay a 7 percent tax on their profits over $100 million. An analysis of the tax’s effects on public companies found that it would apply to about 1,200 of them and bring in about $1 trillion over a decade.

Thomas Kaplan contributed reporting.