How the ultra-wealthy use charitable giving to avoid taxes and exert influence — while ordinary taxpayers foot the bill.
Minnesota Congressman Martin Olav Sabo died earlier this week, after retiring from Congress in 2006.
Rep. Sabo was lead sponsor of legislation called the Income-Equity Act, which he championed for almost a decade. Sabo’s Act would have eliminated the tax deductibility of excessive CEO pay if it exceeded 25 times the average worker pay in a firm. If, for example, the lowest paid worker in a firm was paid $13,000, the corporation would not be able to deduct more than $325,000 of salary as a business expense. After Sabo’s retirement, Congresswoman Barbara Lee (D-CA) picked up the baton and has continued to introduce the legislation.
Rep. Sabo was motivated by a deep sensibility about fairness for working people. He believed companies should not be encouraged, through the tax code, to undervalue their workers and overvalue top management. He saw the legislation as a catalyst, in the late 1990s, for a discussion about growing income inequality.
One fond memory we have of working with Congressman Sabo is captured in this 1998 photo of IPS Director John Cavanagh and I at a Capital Hill Press Conference with Rep. Sabo. We were releasing our fifth annual Executive Excess report on CEO pay and downsizing. In September, we will release our 23rd annual report.
John is holding a clever prop to dramatize the pay gap between average worker and CEO pay. Andrew Boyd, my colleague at the time at United for a Fair Economy, constructed a small portable Washington Monument, something I could disassemble and carry on an airplane.
The actual Washington Monument, visible from our press event, is 555 feet tall. In 1997, if the Washington monument represented average CEO pay, the average worker pay was equal to 21 inches tall, the size of our mini-monument. This comparison illustrated how CEOs were paid over 326 times average worker pay.
At the press event, Congressman Sabo pointed out how the ratio was growing and the “Workers Washington Monument” was shrinking. In 1970, the Workers Washington Monument was 13 feet, six inches tall, representing a 41 to one pay ratio. In 1996, it was 32 inches tall, representing a pay gap of 209 to one.
Since 1998 the annual CEO-worker pay ratio has bounced up and down. In 2014, according to Executive Paywatch at the AFL-CIO, the gap was 373 to one, which means the Workers Washington Monument would be under 18 inches tall.
The mini-Washington monument made several other 2008 appearances, including the annual shareholder meeting of General Electric. I testified in favor of shareholder resolution to limit excessive pay at G.E. and lifted up our mini-monument to illustrate the national pay gap. As part of my testimony, I pointed out that if General Electric CEO Jack Welch’s pay was represented by the full-size Washington monument, average worker pay at GE was equivalent to a sideways LifeSaver.
IPS did dozens of educational events with Congressman Sabo, both in Minnesota and in Washington, DC. Rep. Martin Sabo saw the dangers of inequality emerging decades before other political leaders. We will miss him.
Chuck Collins is a senior scholar at the Institute for Policy Studies, where he coordinates the Program on Inequality and the Common Good. His new TEDx talk, taped in October 2015 at TEDx Jamaica Plain, is now available.