Sponsors (6)
The bill discourages extreme executive-to-worker pay ratios and raises revenue from large firms, but risks prompting corporate behavior that can hurt worker pay, raise prices or reduce returns, and adds compliance and enforcement costs.
Taxpayers and the public: the measure raises federal revenue by taxing corporations with extreme executive-to-worker pay ratios, providing funds for public services or deficit reduction.
Workers at large corporations: the tax creates pressure on firms to narrow very wide executive-to-worker pay gaps, which could reduce inequality within affected companies.
Taxpayers and small businesses: Treasury is directed to issue anti-avoidance rules, which could limit corporate strategies to evade the pay-ratio tax and protect intended revenue/impact.
Workers and jobseekers at affected firms: companies may respond by compressing worker pay growth, reducing hiring, or shifting compensation into benefits to avoid the penalty, which can harm wages and opportunities.
Shareholders, customers, and workers: large firms facing higher tax bills if their pay ratio exceeds 50:1 may cut returns, raise prices, or shift costs onto shareholders/customers/workers rather than executives.
Affected corporations: calculating a 5-year averaged pay ratio and complying with Treasury/SEC rules will increase reporting and compliance costs for large firms.
Based on analysis of 2 sections of legislative text.
Adds a penalty-based increase to the 21% corporate tax rate for C corporations whose five-year averaged executive-to-worker pay ratio exceeds 50:1, with exemptions for smaller firms.
Official title: Amend the Internal Revenue Code of 1986 to impose a corporate tax rate increase on companies whose ratio of compensation of the CEO or other highest paid employee to median worker compensation is more than 50 to 1, and for other purposes.
Introduced September 16, 2025 by Bernard Sanders · Last progress September 16, 2025
Imposes higher corporate income tax rates on C corporations whose executive-to-worker pay ratio exceeds 50:1 by adding a penalty-based increase to the standard 21% corporate rate. The measure defines the pay ratio using the SEC pay-ratio methodology with a five-year annualized average, exempts smaller firms (prior 3-year average gross receipts below $100 million), requires Treasury anti-avoidance rules, and applies to taxable years beginning after December 31, 2025. The law targets large, SEC-reporting companies and aims to discourage excessive CEO pay relative to typical workers by making such corporations pay higher federal tax rates; it creates new compliance obligations, potential tax increases for affected corporations, and rulemaking authority for Treasury to prevent manipulation of workforce composition or contractor arrangements to avoid the ratio calculation.