S.1576 - Stop Subsidizing Multimillion Dollar Corporate Bonuses Act (119th Congress)
Summary
S.1576, the "Stop Subsidizing Multimillion Dollar Corporate Bonuses Act," aims to amend the Internal Revenue Code of 1986 by expanding the denial of tax deductions for excessive employee remuneration. The bill targets to modify Section 162(m) of the code, broadening the definition of 'covered individual' and modifying the definition of 'publicly held corporation'. It also grants regulatory authority to the Secretary to prevent avoidance of the law through pass-through entities.
Expected Effects
The bill's passage would result in corporations being unable to deduct excessive compensation paid to a broader range of individuals. This change would likely increase the tax burden on companies that provide large executive bonuses. It may also incentivize companies to reduce executive compensation or structure it differently to avoid the deduction limitations.
Potential Benefits
- Reduced Taxpayer Burden: By limiting corporate tax deductions for excessive executive pay, the bill could increase government revenue, potentially reducing the tax burden on individual taxpayers.
- Fairer Compensation Practices: The bill may encourage companies to distribute profits more equitably among employees, rather than concentrating wealth at the top.
- Discourages Excessive Risk-Taking: By reducing the financial incentives for executives to pursue short-term gains, the bill could promote more sustainable and responsible corporate behavior.
- Increased Government Revenue: The limitation on deductions could lead to increased tax revenue for the government, which could be used to fund public services or reduce the national debt.
- Addresses Public Perception: This bill addresses public concern about perceived unfairness in executive compensation relative to average worker pay.
Potential Disadvantages
- Reduced Competitiveness: Some argue that limiting executive compensation could make it more difficult for U.S. companies to attract and retain top talent, potentially harming their competitiveness.
- Unintended Consequences: Companies may find ways to circumvent the law, leading to complex and inefficient compensation structures.
- Potential for Litigation: The expanded definition of 'covered individual' and the regulatory authority granted to the Secretary could lead to legal challenges and uncertainty.
- Impact on Shareholders: Reduced executive compensation could potentially impact shareholder value if it affects the company's ability to perform.
- Complexity and Compliance Costs: The new regulations and reporting requirements could increase compliance costs for businesses.
Most Disadvantaged Areas:
Constitutional Alignment
The bill's alignment with the Constitution is primarily based on Congress's power to tax and regulate commerce, as outlined in Article I, Section 8. The Sixteenth Amendment grants Congress the power to lay and collect taxes on incomes. The bill does not appear to infringe upon any specific individual rights or liberties protected by the Bill of Rights.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).