Amid
reports that Senate Democratic leadership may be considering taxes directly linked to executive compensation, it appears that House Democrats
are focused more on corporate taxes. A recent House proposal contained a notable increase in the overall corporate tax rate, but did not contain taxes based on the CEO pay ratio or unrealized stock gains.
However, the House Democratic proposal does include advancing the date of changes to how many employees are exempt from compensation write-offs. The
COVID relief bill from early 2021 doubled the number of highest-paid executives for whom companies cannot deduct compensation above $1,000,000, going from the top 5 executives to the top 10. This change was scheduled for 2027 and estimated to generate $7.8 billion in tax revenue over the first 5 years. However, the current proposal would move that date up to 2022.
On the regulatory front, SEC Chairman Gensler was put in the Senate crosshairs when he
testified before the Senate Committee on Banking, Housing, and Urban Affairs on Tuesday, Sept. 14th. Accused by Senator Pat Toomey (R-PA) of
subverting the mission of the SEC, Gensler fired back with, “today’s investors are looking for consistent, comparable, and decision-useful disclosures around climate risk, human capital, and cybersecurity… I believe the SEC should step in when there’s this level of demand for information.” Senator Tina Smith (D-MN) agreed, arguing that climate risk is a systemic risk to investors and therefore should not be considered a “social issue.”
It is likely that Senate and House leadership will need more time to bring together a full package for the reconciliation bill. On the regulatory front, Gensler has set out a specific path and he intends to stick to it. The Center expects that new rules related to HCM and climate change disclosures will arrive this fall and will likely go through the full rulemaking process with economic impact analyses and opportunities for public comment.
