Democratic leaders in Congress have circulated a document with various policy ideas to increase revenue in the reconciliation bill, including an increase in a company’s corporate tax rate if the CEO’s pay ratio compared to the average employee exceeds certain levels. It is not clear if the tax would mirror those implemented in municipalities such as San Francisco or proposed by Senator Bernie Sanders (I-VT).
The idea is in a conceptual stage and has not been formally included in the reconciliation package.
According to an article on CNBC, the idea was included on a discussion list or a “…draft of ideas that lawmakers assemble before formally pitching them in the House or Senate.” Such a list may be circulated to gauge support for a particular provision prior to including it in formal legislation.
Further reporting by Politico noted that Senate Finance Committee Chair Senator Ron Wyden (D – OR) developed a list of 18 potential revenue raising policy ideas. That list includes “expand[ing] restrictions on business deductions for employees making more than $1 million” as well as excise taxes for buying back “large” numbers of shares and requiring billionaires to pay taxes on unrealized stock price gains. The article does not note if such taxes could be applied to unrealized gains on unvested equity awards or unexercised stock options. Additional considerations include requiring retirement account withdrawals above certain thresholds.
It is possible that the ratio triggering tax would match those in Sen. Sanders’ Tax Excessive CEO Pay Act. That bill would increase the corporate tax rate from 21% to 26% based on the CEO pay ratio on the following schedule (please note, this is NOT currently included in draft reconciliation bill text):
- Ratio of 50 to 100 – 0.5% increase in the corporate tax rate (San Francisco’s tax starts at 100:1)
- 100 - 200 – 1% increase
- 200 - 300 – 2% increase
- 300- 400 – 3% increase
- 400 - 500 – 4% increase
- more than 500 – 5% increase
Other potential sources of revenue included eliminating tax subsidies for fossil fuels, taxes on plastic for single-use items, and closing the so-called carried interest loophole.
San Francisco and Portland voters each approved the local CEO pay ratio taxes, but Sen. Sanders’ proposed tax has not received widespread adoption or support from the Democratic leadership. Democratic leadership has generally focused on increasing pay for lower-income employees rather than punishing high earners. Though Republicans are united in opposition to the reconciliation package, it will not be subject to the filibuster. Therefore, the package must maintain the support of every Democratic Senator including moderates Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) who have both expressed skepticism about more progressive efforts to increase revenue.
