The “CEO/Employee Pay Fairness Act” would deny corporate tax deductions for executive compensation over $1 million—unless they raise salaries for lower-level workers to keep pace with cost of living and labor productivity increases. Rep. Chris Van Hollen (D-Md.) authored the bill.
In a letter to colleagues, House Democratic Leader Nancy Pelosi said the bill would “help ensure that workers share in the fruit of their productivity.”
According to Politico, the bill could be voted on through a procedure known as a Motion to Recommit on January 8, when the House is expected to consider legislation to approve the Keystone pipeline. The Republican majority is sure to shoot down the motion, but the maneuver gives Democrats an opportunity to draw attention to their priorities for the new session.
The “CEO/Employee Pay Fairness Act” is just the latest move to address a massive loophole in the tax code that encourages excessive executive compensation. A 1993 amendment to the tax code caps the total executive pay corporations can deduct off their taxes at no more than $1 million —unless the pay is so-called “performance” pay.
Thanks to this loophole, corporations can simply declare the stock-based rewards they lavish on executives “performance-based” and then go on to deduct the many millions involved as a basic business expense. The more they pay their CEO, the less they pay in taxes.