The Tax Excessive CEO Pay Act is Back

Sen. Bernie Sanders (I-VT.) is once again putting CEO pay in the legislative crosshairs by leading a group of 5 Democratic lawmakers in introducing legislation that would increase the corporate tax rate for companies that pay their CEOs 50 times more than their median worker or higher.

Why it matters: The Tax Excessive CEO Pay Act was introduced to encourage large companies to decrease executive pay (or increase worker pay, or both) by imposing taxes on companies with high CEO-to-worker pay ratios. The legislation could potentially impact some of the largest corporations and employers in the country. “Americans across the political spectrum are outraged by the extreme gaps between CEO and worker pay,” Sanders said.

What is included: The proposed legislation includes a tax rate hike for companies with a CEO-to-worker pay ratio over 50 to 1. The maximum tax penalty proposed is 5% for corporations where the top executive’s salary is more than 500 times the average worker’s pay. The legislators expect the bill to generate $150 billion in U.S. revenue over a 10-year period. The tax increase could be reduced or avoided by companies if they choose to increase worker pay and decrease CEO salaries.

The bottom line: Given that 2024 is an election year, the proposal is mostly a messaging bill with little chance of becoming law this Congress.