[Congressional Record (Bound Edition), Volume 151 (2005), Part 11]
[Extensions of Remarks]
[Page 15748]
[From the U.S. Government Publishing Office, www.gpo.gov]




                       INCOME EQUITY ACT OF 2005

                                 ______
                                 

                         HON. MARTIN OLAV SABO

                              of minnesota

                    in the house of representatives

                         Tuesday, July 12, 2005

  Mr. SABO. Mr. Speaker, today I introduced the Income Equity Act of 
2005. I have long believed that the growing wage gap in our country is 
a big problem that we need to address. Wage disparities between high- 
and low-income households are the largest on record. My legislation 
would encourage companies to evaluate their pay scale with a focus on 
those paid the lowest wages.
  The Income Equity Act of 2005 would do two things: For tax purposes, 
companies are currently able to deduct reasonable employee compensation 
from their taxable income--up to $1 million dollars. My legislation 
would cap the top write-off for a company at 25 times whatever the 
lowest paid full-time employee earns. In other words, if the lowest 
paid worker makes $20,000 in a year, the highest salary write-off would 
be $500,000--25 times the lowest salary. But the important part is 
linking top to the bottom. My goal is that companies would be 
encouraged to evaluate their entire payscale--with an incentive to re-
evaluate the lowest salaries paid.
  My legislation also addresses payment in the form of stocks. Our tax 
code currently has no jurisdiction over compensation in the form of 
stock options or unrestricted stock, which is where most high-paid 
executives are deriving the bulk of their bounty these days.
  I am not suggesting that we limit CEO pay. However, I believe that 
hard-working Americans should earn enough money to properly feed, house 
and clothe their families, and American businesses have a role to play.
  The idea for the Income Equity Act occurred to me during a 
Congressional trip to Mexico in the early 90s where I witnessed 
extraordinary wealth alongside with heart-breaking poverty.
  For years, we've been hearing reports of the growing gap between high 
wage earners and low wage earners. And this year is no different. As 
reported by many national magazines in annual executive pay surveys, 
salary increases continue to be more and more disproportionate. 
Business Week magazine, for example, reported that average CEO 
compensation rose 15 percent in the past year, while average worker 
compensation rose a mere 2.9 percent. And in some cases, lavish rewards 
continue to be heaped on executives with little to no correlation to 
stock performance or the fiscal health of the company.
  The Census Bureau's most recent report shows that the disparities 
between high- and middle-income and the gap between high- and low-
income households are the largest (or tied for the largest) on record 
since this data has been available.
  In 1979, the total income of the top 1 percent equaled the income of 
the bottom 27 percent. In 2000, the total income of the top 1 percent 
equaled the income of the bottom 48 percent. That ratio still stands 
today.
  People at the bottom of the income ladder suffer when they can't 
support themselves by their wages. In the end, our entire society pays 
when those being left behind must rely on government support for food, 
housing and health care.
  Income inequality also threatens our democratic principles: Americans 
hold deeply the view that every person willing to work hard should be 
rewarded. But equal opportunity is undermined when most workers do not 
fairly share in the wealth created by their work.
  To illustrate this point, one person earning a minimum wage would 
have to work 11,660 years to earn what the top-paid CEO made in 2004--
which was $120.1 million. This is outrageous, and our government should 
not be in the business of encouraging or subsidizing such disparity.
  While developing the assembly line and Ford Motor Co., Henry Ford 
firmly believed that all of his employees should be able to afford to 
buy the cars they were making. His compensation philosophy didn't just 
serve his employees well. It provided Ford Motor Company with a 
workforce that had incredible morale, high productivity, loyalty and 
ongoing recruiting success.
  Mr. Speaker, there is no bad job, just bad pay. Removing tax 
deductions for excessive compensation sends the message that American 
taxpayers expect companies to do better by their workers.

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