Stop Subsidizing Multimillion Dollar Corporate Bonuses Act

Mr. President, I am reintroducing the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act with Senator Blumenthal. This legislation would end special tax exemptions for huge CEO bonuses by closing a glaring loophole that allows publicly traded corporations to deduct the cost of multimillion-dollar bonuses from their corporate tax bills. If executives perform, companies may compensate them however they wish, but U.S. taxpayers shouldn't have to subsidize these massive bonuses.

Under current tax law, 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. However, a loophole relating to performance-based compensation has allowed many public corporations to avoid such limits and freely deduct excessive executive compensation. To illustrate how this loophole works, if a CEO receives $1 million in cash compensation and $14 million in performance-based compensation in a given year, the public corporation's taxable income would decline by $15 million. With the current corporate tax rate at 35 percent, the corporation in this case would receive a tax giveway of $5.25 million.

The Stop Subsidizing Multimillion Dollar Corporate Bonuses Act puts an

end to that giveaway and limits public corporations to a single $1 million per employee deduction as was originally intended. Using the same example above, a profitable public corporation could deduct $1 million of the CEO's $15 million compensation package but could not claim a deduction on the remaining $14 million. So instead of claiming $5.25 million in Federal subsidies for the CEO's pay, this public corporation will be contributing $4.9 million toward improving our roads, our schools, and our military--costs that middle-class families are already underwriting.

Indeed, over a 10-year window, the Joint Committee on Taxation, in their most recent assessment, estimated that closing this loophole would save U.S. taxpayers over $50 billion.

Specifically, our legislation first applies section 162(m) of the Tax Code to all employees of publicly traded corporations so that all compensation is subject to a deductibility cap of $1 million. Publicly traded corporations would still be permitted to pay their executives as much as they desire, but compensation above and beyond $1 million would no longer be subsidized by other hard-working taxpayers through our Tax Code.

Second, our bill removes the exemption for performance-based compensation, which currently permits compensation deductions above and beyond $1 million when executives have met performance benchmarks set by the corporation's board of directors. As a result, publicly traded corporations would still be able to incentivize their executives, but all such incentives would be subject to a corporate deductibility cap of $1 million.

Finally, our legislation makes a technical correction to ensure that all publicly traded corporations that are required to provide quarterly and annual reports to their investors under Securities and Exchange Commission rules and regulations are subject to section 162(m). Currently, this section of the Tax Code only covers some publicly traded corporations who are required to provide these periodic reports to their shareholders. Discouraging extravagant compensation packages shouldn't turn on whether a publicly traded corporation falls into one SEC reporting requirement or another, and our bill closes this technical loophole.

Even our President-elect has acknowledged the problem of excessive CEO pay. When asked about this issue on CBS's ``Face the Nation'' on September 13, 2015, then-Presidential Candidate Trump said, ``Well, it does bug me. It's very hard if you have a free enterprise system to do anything about that. The boards of companies are supposed to do it. But I know companies very well. And the CEO puts in all his friends. And so you will take a company like, I could say Macy's or many other companies, where they put in their friends as head of the company, and they get whatever they want, because the friends love sitting on the board. So that's a system that we have. And it's a shame and it's disgraceful. And, sometimes, the boards rule. But I would say it's probably less than 10 percent. And you see these guys making these enormous amounts of money. It's a total and complete joke.''

Our legislation tackles this issue head on by ending the public subsidy of excessive CEO compensation, derailing the lavish tax breaks that exclusively benefit public corporations. This is simply a matter of fairness, ensuring that corporations--and not hard-working taxpayers who face their own challenges in this economy--are paying for the multimillion-dollar bonuses they have decided to dole out to their CEOs.

We need to prioritize tax breaks that grow our economy and strengthen the middle class. This bill would eliminate some of the inequity in the Tax Code. Again, companies are free to pay their executives as much as they want, but the American taxpayer shouldn't help foot the bill for a CEO's multimillion-dollar bonus.

I thank Public Citizen, Americans for Financial Reform, the AFL-CIO, International Brotherhood of Teamsters, and MIT professor Simon Johnson for their support. I also want to thank Senator Blumenthal for working with me on this issue, and I urge our colleagues to join us in cosponsoring this legislation.

Mr. President, I am reintroducing the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act with Senator Blumenthal. This legislation would end special tax exemptions for huge CEO bonuses by closing a glaring loophole that allows publicly traded corporations to deduct the cost of multimillion-dollar bonuses from their corporate tax bills. If executives perform, companies may compensate them however they wish, but U.S. taxpayers shouldn't have to subsidize these massive bonuses.

Under current tax law, 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. However, a loophole relating to performance-based compensation has allowed many public corporations to avoid such limits and freely deduct excessive executive compensation. To illustrate how this loophole works, if a CEO receives $1 million in cash compensation and $14 million in performance-based compensation in a given year, the public corporation's taxable income would decline by $15 million. With the current corporate tax rate at 35 percent, the corporation in this case would receive a tax giveway of $5.25 million.

The Stop Subsidizing Multimillion Dollar Corporate Bonuses Act puts an

end to that giveaway and limits public corporations to a single $1 million per employee deduction as was originally intended. Using the same example above, a profitable public corporation could deduct $1 million of the CEO's $15 million compensation package but could not claim a deduction on the remaining $14 million. So instead of claiming $5.25 million in Federal subsidies for the CEO's pay, this public corporation will be contributing $4.9 million toward improving our roads, our schools, and our military--costs that middle-class families are already underwriting.

Indeed, over a 10-year window, the Joint Committee on Taxation, in their most recent assessment, estimated that closing this loophole would save U.S. taxpayers over $50 billion.

Specifically, our legislation first applies section 162(m) of the Tax Code to all employees of publicly traded corporations so that all compensation is subject to a deductibility cap of $1 million. Publicly traded corporations would still be permitted to pay their executives as much as they desire, but compensation above and beyond $1 million would no longer be subsidized by other hard-working taxpayers through our Tax Code.

Second, our bill removes the exemption for performance-based compensation, which currently permits compensation deductions above and beyond $1 million when executives have met performance benchmarks set by the corporation's board of directors. As a result, publicly traded corporations would still be able to incentivize their executives, but all such incentives would be subject to a corporate deductibility cap of $1 million.

Finally, our legislation makes a technical correction to ensure that all publicly traded corporations that are required to provide quarterly and annual reports to their investors under Securities and Exchange Commission rules and regulations are subject to section 162(m). Currently, this section of the Tax Code only covers some publicly traded corporations who are required to provide these periodic reports to their shareholders. Discouraging extravagant compensation packages shouldn't turn on whether a publicly traded corporation falls into one SEC reporting requirement or another, and our bill closes this technical loophole.

Even our President-elect has acknowledged the problem of excessive CEO pay. When asked about this issue on CBS's ``Face the Nation'' on September 13, 2015, then-Presidential Candidate Trump said, ``Well, it does bug me. It's very hard if you have a free enterprise system to do anything about that. The boards of companies are supposed to do it. But I know companies very well. And the CEO puts in all his friends. And so you will take a company like, I could say Macy's or many other companies, where they put in their friends as head of the company, and they get whatever they want, because the friends love sitting on the board. So that's a system that we have. And it's a shame and it's disgraceful. And, sometimes, the boards rule. But I would say it's probably less than 10 percent. And you see these guys making these enormous amounts of money. It's a total and complete joke.''

Our legislation tackles this issue head on by ending the public subsidy of excessive CEO compensation, derailing the lavish tax breaks that exclusively benefit public corporations. This is simply a matter of fairness, ensuring that corporations--and not hard-working taxpayers who face their own challenges in this economy--are paying for the multimillion-dollar bonuses they have decided to dole out to their CEOs.

We need to prioritize tax breaks that grow our economy and strengthen the middle class. This bill would eliminate some of the inequity in the Tax Code. Again, companies are free to pay their executives as much as they want, but the American taxpayer shouldn't help foot the bill for a CEO's multimillion-dollar bonus.

I thank Public Citizen, Americans for Financial Reform, the AFL-CIO, International Brotherhood of Teamsters, and MIT professor Simon Johnson for their support. I also want to thank Senator Blumenthal for working with me on this issue, and I urge our colleagues to join us in cosponsoring this legislation.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.