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Floor Speech

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Mr. REED. Mr. President, I am proud to join Senators Blumenthal, Whitehouse, Merkley, Baldwin, Warren, Van Hollen, and Sanders in introducing the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act. Our legislation would finally fully close a loophole that allows publicly traded corporations to deduct the cost of multimillion-dollar bonuses from their corporate tax bills. At a time when the disparity in pay between CEOs and average workers is 290 to 1, there is no justification for forcing U.S. taxpayers to foot the bill for lavish executive compensation packages. But that is what is happening.

Under section 162(m) of the Tax Code, publicly traded corporations cannot deduct more than $1 million in compensation paid to their top executives. Section 162(m), however, does not apply to all employees, and corporations are exploiting this loophole to claim tax deductions for compensation packages for uncovered employees that far exceed $1 million. Indeed, publicly traded corporations are offering these lucrative compensation deals to ever increasing numbers of executives-- not just a few at the very top of the organization--even when revenue growth for these companies slows.

Both Republican and Democratic administrations have recognized the need to close loopholes in section 162(m). In fact, both President Trump and President Biden signed laws based on earlier versions of my legislation to curtail the abuse of this deduction. This includes ensuring that performance-based compensation is actually counted as compensation under section 162(m) and increasing the number of highly paid executives who are subject to section 162(m). Partially tightening the law in these ways has saved taxpayers billions of dollars. But until the loophole is fully closed, taxpayers will continue to be forced to subsidize extravagant compensation.

The Stop Subsidizing Multimillion Dollar Corporate Bonuses Act would address the remaining gaps by applying section 162(m) restrictions to all employees of publicly traded corporations, subjecting all compensation to a deductibility cap of $1 million per employee. The Joint Committee on Taxation has estimated that closing this loophole would save taxpayers nearly $80 billion over 10 years. In other words, taxpayers are currently paying around $8 billion each year to subsidize exorbitant executive pay packages.

To be clear, our bill does not prevent publicly traded corporations from being able to pay their executives as much as they want. These corporations simply won't be able to deduct the portion of the compensation package that exceeds $1 million. This is a matter of fairness. It ensures that corporations and shareholders--not taxpayers--are shouldering the cost of the multimillion dollar compensation packages.

I thank Public Citizen, Americans for Financial Reform, the AFL-CIO, the International Brotherhood of Teamsters, MIT Professor and Nobel Prize Winner Simon Johnson, Take On Wall Street, Americans for Tax Fairness, and the Institute for Policy Studies, Global Economy Project for their support. I urge our colleagues to join us in cosponsoring this legislation and pressing for its passage.

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