Curtailing Executive Overcompensation (CEO) Act

Key Points

• The bill creates a new federal excise tax on large companies whose CEO pay is far higher than what their typical worker earns. Only companies with at least $100 million in revenue and $10 million in total wages over three years are covered.
• The tax kicks in once a company's highest paid employee earns more than 50 times the median wage of all its workers earning at least $5,000 a year.
• The total tax owed is limited to no more than 1 percent of the company's total gross receipts for the year, capping how much any single company could owe no matter how large its pay gap.
• Companies cannot deduct this new tax from their income taxes, meaning it functions as a straightforward added cost rather than one that can be offset elsewhere in the tax code.
• The Treasury is directed to write rules blocking companies from gaming the system, such as reclassifying employees as contractors to make their pay gap look smaller.
• If enacted, the new tax would apply starting with the tax year after the bill becomes law, giving companies time to adjust before owing any tax.