Reed, Blumenthal & Doggett Renew Push to End Special Tax Deductions for Huge Executive Bonuses
WASHINGTON, DC – U.S. Senators Jack Reed (D-RI) and Richard Blumenthal (D-CT), along with U.S. Representative Lloyd Doggett (D-TX), reintroduced the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act (S. 178). This legislation would close a major loophole in current corporate tax law by putting an end to special tax deductions for huge executive bonuses and prevent publicly traded corporations from deducting the cost of multimillion-dollar bonuses from their corporate tax bills.
Under section 162(m) of the tax code as amended by the 2017 Trump tax law (TCJA), when a publicly traded corporation calculates its taxable income, it is generally permitted to deduct the cost of compensation from its revenues, with limits up to $1 million for some of the firm’s most senior executives.
In the 115th Congress, the TCJA closed some of the pre-existing 162(m) loopholes by taking some of the provisions from the prior version of the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act, including removing the exemption for performance-based compensation, which previously permitted compensation deductions above $1 million when executives met performance benchmarks.
While these steps were a start, more should have been done, such as applying section 162(m) to all employees of publicly traded corporations so that all compensation is subject to a deductibility cap of $1 million.
Partially closing these 162(m) loopholes saved taxpayers $9.2 billion according to the Joint Committee on Taxation (JCT), but last Congress, the JCT estimated that fully closing the loophole along the lines of the reintroduced legislation would save taxpayers an additional $27 billion dollars.
This legislation is simply a matter of fairness, ensuring that corporations – and not hardworking taxpayers who face their own challenges in this economy – are paying for the multi-million dollar bonuses corporations have decided to dole out to their senior executives. Instead of showering corporations with additional benefits they certainly don’t need, more should be done to help families, who are barely surviving, make it to the other side of this public health emergency.
“Corporations shouldn’t be able to get out of paying their fair share of taxes by lavishing senior executives with jumbo bonuses at the expense of taxpayers, workers, and shareholders. Taxpayers shouldn’t be subsidizing millionaire compensation and it’s way past time for this loophole to go,” said Senator Reed. “Companies are free to pay their executives as much as they want. But the American taxpayer shouldn’t help foot the bill for multimillion-dollar bonuses. The Stop Subsidizing Multimillion Dollar Corporate Bonuses Act puts an end to this give-away and will restore fairness to the tax code and ensure corporations, not taxpayers, are the ones who pay for multi-million dollar bonuses. Success and capitalism are not at issue here. What’s at issue is a broken system that has taxpayers subsidizing multi-million dollar executive bonuses while those same taxpayers are struggling with rising health care and housing costs in the midst of a public health emergency.”
“This bill would end a lavish loophole for corporations that overpay their executives so they can underpay their fair share of taxes. It is outrageous and unconscionable that American taxpayers subsidize tens of billions of dollars in corporate bonuses while the working poor struggle to make ends meet, middle-class wages stay flat and income inequality rises,” said Senator Blumenthal.
“Our tax code has a perverse incentive for companies: the more executives are paid, the less taxes paid,” said Congressman Doggett. “In the ongoing crisis, working families need a break, but it’s large corporations that got one with a tax subsidy for multimillion-dollar executive pay packages. This bill could raise roughly $27 billion to invest in building back Americans’ economic wellbeing.”
In the Senate, the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act is also cosponsored by U.S. Senators Tammy Baldwin (D-WI), Sherrod Brown (D-OH), Jeff Merkley (D-OR), Chris Van Hollen (D-MD), Sheldon Whitehouse (D-RI), and Elizabeth Warren (D-MA).