Transcription
[Liz] There's this question that's been bugging me about the CEO of Starbucks, Brian Niccol. On the one hand, he seems like a pretty typical rich guy. $14,000 espresso machine. Commutes on a private jet. I asked people outside my neighborhood Starbucks how many times they thought you'd have to multiply the average barista’s salary to get to what Niccol made last year.
- I’m gonna go way down here. - One thousand eight hundred... - I’ll say like 1,600.
[Liz] It's 1,794.
[Liz] Right on the money. People get it. This gap is almost like a shorthand for understanding the entire economy. But here’s what they don’t get.
- Now, we're going to go back in time to 1980. What do you think was the gap between the average CEO in 1980 and his workers?
- Five hundred. - Like a thousand? I don’t know.
- So back in 1980, the average gap between the CEO and their worker was 42.
- That's crazy. In just over forty years, an economy built on “trickle-down” policies has locked an entire generation out of the American dream. So here's the question that's been bugging me. If the economy wasn't always this way, is it possible to go back? In the next few months, voters in two different cities will have a chance to find out. Ballot initiatives in Los Angeles and San Francisco could force corporations to start closing those gaps. But they're spending big, along with a handful of billionaires, to make sure this popular tool for unrigging the economy doesn't spread.
Frank Capra's movie “It’s a Wonderful Life,” came out in 1946. There's obviously a lot that's very different about American life: the hair, the fashions, the walkable communities. But this is the difference that gets me every time.
- You said that. What did you say just a minute ago? They had to wait and save their money before they even thought of a decent home? Do you know how long it takes a working man to save $5,000? This scene takes place in 1928. George Bailey is building and selling homes that would cost $96,000 today.
- Me, Giuseppe Martini I own my own house!
[Liz] Even as recently as 1980, a single-family home in all of these blue-shaded areas cost less than three times what the average worker made in a year. So what happened? Well, let's look at the two numbers at play here. First, home prices. Most of the debate about this number focuses on supply.
- The most important thing is to build more housing. - Increase the nation's housing supply. - Build, baby, build.
Yes, housing supply is an issue. But what we don't talk about as much as the second number in the ratio: income.
[Sarah Anderson] Back in the 1960s, the gap between average big-company CEO pay and worker pay was in the range of about 25 to 1.
[Liz] Strong labor unions fought to ensure that a large portion of those profits went back to the workers who created them.
[Sarah] That was a time when top marginal tax rates on the rich were much higher than they are today. And so there wasn't the same incentive to shovel out all this money to the CEO because so much of it would have been taxed away anyway. But then politicians changed the incentives.
[Sarah] Starting in the Reagan era, they started really slashing those top tax rates.
[Liz] As a result, the gap between CEO pay and worker pay started to widen. Then it really took off in the 90s, when a legal loophole incentivized stock-based pay for executives over salaries. Today, we're seeing, hundreds of times to one.
[Liz] As corporate profits have shifted from workers’ pockets to CEOs and shareholders, the average paycheck now covers less and less, especially when it comes to housing. And in an economy where only the rich have money to spend, the price of everything goes up. Since 1980, the median home price in a lot of areas has jumped to six, seven, eight, even nine times what the median worker makes in a year. In Los Angeles, the cost of a single-family home has now reached almost 11 times median annual income.
[Vannessa] I still live with my parents, and my other two sisters still live with our parents just because, you know, housing is so expensive. Who wants to say, “Hey, I'm 30, living with my parents.” No one wants to say that, but it's unfortunately a lot of people's reality. We were promised that if you contribute to society in the form of having a job, that you'd be rewarded with a middle class lifestyle, you know? And that just doesn't really exist anymore.
[Sarah] Since the administration of Ronald Reagan in the 1980s, we've been hearing this line that we need to lift taxes on the top.
[Reagan] When I sign this bill into law, America will have the lowest marginal tax rates and the most modern tax code among major industrialized nations, one that encourages risk taking, innovation, and that old American spirit of enterprise.
[Sarah] And here we are, what, 45, 46 years later, and we are still waiting for that model of the economy to trickle down to the rest of us.
[Liz] In San Francisco and Los Angeles workers are fighting for a new type of tax, one that could undo the damage done by decades of failed “trickle-down” policies. No matter what, when the economy's good, when the economy's bad, billionaires are always making money. They are being vastly outspent by billionaires and corporations in both cities who are terrified of what an end to their political and economic dominance might look like.
- We may not have billions of dollars. We don't even have millions of dollars. But what do we have?
- People!
- We have people power and that's how we're going to win this.
[John] Hey, I’m looking for Mark.
- Yeah
-Hey I’m John. I'm a city worker, engineer with public works, We want to basically tax billionaire corporations, so, we want to keep the city going and actually improve it.
[Liz] These taxes specifically target corporations with massive pay gaps between their CEOs and their workers.
- It's taxing the people who already have the money and not putting it on people like us. The regular, average voters here in San Francisco. These overpaid CEO taxes would raise taxes at the local level on companies that have huge gaps between their CEO and their worker pay. They would apply only to very large corporations that are making money in these cities. And the level of tax would increase based on the size of the gap between their CEO and their worker pay.
In Los Angeles, $0.07 of every dollar raised by this tax would go into a special Working Families Housing Fund. And the city's housing authority could only use that money to build housing for families who make under the city's median income. The goal is for the city's working families to spend no more than 30% of their take-home pay on housing.
[John Paul] It would be a life saver. I could be able to move out. I could think about things like family planning. You get to save up, you get to enjoy life a little bit, and you know, and plan, you know, plan for the future. The tax would basically give corporations a choice. They could either, narrow their gaps and avoid paying the tax, or they would need to pay extra revenue, which would go to really vital services that these cities need. I think it would just allow everybody the chance to breathe a little bit.
There are many taxes that are designed to both influence and discourage harmful behavior while also raising revenue. And tobacco taxes are a perfect example. They have not fully eliminated smoking in this country, but they have reduced it substantially, and they've raised a lot of money for healthcare programs. Another similarity? Back in the 90s, tobacco companies spent millions trying to fight these taxes. Fast forward to today, and the CEO class is running the same play.
This is a list of all the corporations and billionaires that have spent money so far trying to defeat the CEO pay-gap tax in San Francisco. Billionaire DoorDash founder Tony Xu. Gap apparel nepo babies William and Robert Fisher. Corporations like Williams-Sonoma, Uber, Gap and Amazon. So far, they've raised $3.5 million from 28 donors. The SEC filings from the public corporations on this list indicate that they made more than enough in profits last year to close their pay gaps, avoid the tax, and have plenty left over. But what about these guys? Crypto billionaire Chris Larsen? Venture capitalist Michael Moritz? It's not like they depend on paying workers poverty wages like a company like the Gap, or Williams-Sonoma, or Target. Why are they so invested in this local ballot initiative?
To really understand their resistance, we need to zoom out from California. Nationwide, these types of pay gap taxes are incredibly popular across the political spectrum. A 2024 poll found that 80% of likely voters would support a tax hike on companies that pay their CEO more than 50 times the median worker. What I've seen for quite some time is that across the political spectrum, people are fed up with overpaid CEOs. Billionaires and their defenders, they know this. Here's how they reacted a couple of years ago to the idea of a national CEO pay-gap tax.
- Senator Bernie Sanders and a group of Democratic lawmakers are pushing to raise taxes for companies that pay their CEOs at least 50 times more than their typical worker's salary.
- It's not going to happen, it’s not going to happen.
- It just makes me think-
- It’s not gonna happen but it’s a populist cudgel. You know, it's almost a kabuki dance. It’s almost like- It's just posturing.
[Liz] Imagine knowing so few working people that you can only imagine a policy like this as a move on a political chessboard. You literally can't contemplate someone supporting a policy like this because it would make the average person's life better. You'll have people who are going to look at a job like Starbucks and say, like, well that's a job for, you know, high schoolers who are trying to have their first jobs. And it’s like, no. I have people that I work with who've worked for the company for over ten years. They deserve to have a life.
If these taxes pass in San Francisco in June and Los Angeles in November, that shifts the idea of what's possible nationally. Billionaires and corporations are spending big to stop both the tax itself and what it represents. A new kind of economy. One in which workers keep more of the wealth that they create, Where the idea of owning a home or starting a family doesn't seem out of reach.
[John Paul] There are more working-class folks than there are millionaires and CEOs. So there are power in numbers. Working-class folks can organize to create the environment where the city is benefiting all people.