Jan. 29, 2014
Public Citizen Applauds House Member for Introducing Legislation to Eliminate Taxpayer Subsidization of Wall Street Bonuses; Measure Would Close Loophole That Allows Companies to Write Off CEO Bonus Pay
Statement of Lisa Gilbert, Director, Public Citizen’s Congress Watch Division
WASHINGTON, D.C. – Public Citizen commends U.S. Rep. Lloyd Doggett (D-Texas) for groundbreaking new legislation that would close a gaping loophole in the tax code that allows corporations to deduct executive bonus compensation from their taxes.
This is a particularly timely move in the wake of a presidential State of the Union address focused on income inequality. One solution to this problem is to deal with runaway incentive compensation.
This bill, introduced today, is the House companion to identical Senate legislation, S. 1476, authored by U.S. Sens. Jack Reed (D-R.I.) and Richard Blumenthal (D-Conn.).
In an era when executive compensation has risen 725 percent since 1978 — 127 times faster than worker compensation — the loophole in section 162(m) of the federal tax code is particularly appalling. The code limits corporate tax deductibility for executive compensation to $1 million, but the law includes no limit in deductibility for performance pay or CEO bonuses.
Partly due to this, bonus pay has become a significant driver of excessive corporate executive pay. A study by the Economic Policy Institute estimates that between 2007 and 2010 alone, taxpayers subsidized more than $30 billion in executive performance pay because of the loophole.
The Stop Subsidizing Multimillion Dollar Corporate Bonuses Act would close this loophole and put an end to taxpayer-subsidized executive bonuses. The public deserves nothing less.