This bill would deny publicly held companies a tax deduction for performance-based pay exceeding $1 million to any of its current or former executives or directors if the corporation doesn’t meet the pay fairness requirements this bill establishes. There would be two requirements: firstly that the average compensation paid to all U.S. employees for the taxable year exceeds the inflation and productivity growth adjusted average for the prior year; and secondly that the aggregate compensation paid by the employer exceeded that of the preceding tax year.
- Not enactedThe President has not signed this bill
- The house has not voted
- The senate has not voted
Committee on FinanceIntroducedJanuary 3rd, 2017
- senate Committees
What is Senate Bill S. 20?
Cost of Senate Bill S. 20
In-Depth: In a fact sheet released by Democrats on the House Budget Committee for this bill’s predecessor from 2014, lawmakers explained why they believe this bill is needed:
“Since the 1970s, compensation for regular workers has not kept up with increases in labor productivity. At the same time, executive pay continues to spiral upwards. Fifty years ago, the average CEO in the United States was paid 20 times more than the typical worker. Now that ratio is 300-to-1, far higher than in any other advanced economy. To add insult to injury, average taxpayers subsidize excessive executive pay through corporate tax deductions.”
The Tax Foundation expressed its opposition to this bill’s predecessor on the grounds that it creates more economic distortions without leading to higher incomes for workers:
“A tax code should be constructed in a way that raises the greatest amount of revenue while creating the least number of distortions in the economy. In this way, the government has a reliable stream of revenue for important spending policies. The CEO-Employee Pay Fairness Act is not good tax policy and will not result in higher incomes for workers. The U.S. corporate income tax is already broken. This change would only introduce more bias and complexity into the corporate tax code.”
This legislation is sponsored by Sen. Chris Van Hollen (D-MD), who introduced versions of it in previous congresses when he was a member of the House. It doesn’t yet have any cosponsors.
- House Budget Committee Democrats Press Release (Previous Version)
- Roosevelt Institute (In Favor - Previous Version)
- Tax Foundation (Opposed - Previous Version)
Summary by Eric Revell(Photo Credit: Fortune Live Media via Flickr / Creative Commons)