Sponsors (6)
The bill seeks to raise revenue and discourage extreme CEO-to-worker pay ratios among large firms, but it risks economic side effects—higher costs for shareholders, customers, or workers, plus added compliance and litigation—while largely sparing small private businesses.
Taxpayers and the public: The bill raises new federal revenue by taxing large corporations with extreme executive-to-worker pay ratios, which can be used for public services or deficit reduction.
Employees at large, publicly reporting firms: Corporations face financial incentives to narrow very large executive-to-worker pay gaps, which could moderate outsized executive pay and reduce inequality pressure within those firms.
Small private businesses: The tax applies only to large firms (SEC filers or firms with ≥$100M average receipts), so small private companies avoid the new tax and its direct compliance burden.
Shareholders, customers, and workers of affected corporations: Large firms with executive-to-worker pay above 50:1 will face higher tax bills, which could reduce shareholder returns, lead to higher prices, or pressure firms to cut costs.
Workers at affected firms: Companies may respond to the tax by compressing worker pay growth, reducing hiring, or shifting compensation into non-taxed benefits to avoid penalties, potentially harming wages and job opportunities.
Affected corporations and their advisors: Firms will incur higher compliance and reporting costs to calculate multi-year averaged pay ratios and follow Treasury/SEC guidance.
Based on analysis of 2 sections of legislative text.
Raises a corporation's 21% tax rate by a penalty schedule when its CEO-to-worker pay ratio exceeds 50:1, using a five-year average and exempting firms under $100M average receipts.
Introduced September 16, 2025 by Bernard Sanders · Last progress September 16, 2025
Imposes an extra corporate tax on companies whose CEO-to-worker pay ratio exceeds 50:1 for a taxable year. The extra tax raises the standard 21% corporate rate by a penalty percentage set in a table and is calculated using a five-year average of the compensation figures that public companies report under SEC pay-ratio rules. Applies to public companies and large private corporations (those with average gross receipts of at least $100 million over the prior three years); smaller corporations under that threshold are exempt. Treasury must write anti-avoidance rules to stop manipulation of the ratio, and the change takes effect for taxable years beginning after December 31, 2025.