Income Equity Act Caps Tax Deductibility
of Excessive Corporate Compensation
by Chris Riddiough, DSA Action Network, Nov 10, 1997
In February 1997, Rep Martin Sabo (D-MN) introduced the Income Equity Act. This Act addresses concerns about excessive CEO pay. Under current law, compensation is tax deductible as a business expense. The Income Equity Act caps the tax deductibility of excessive compensation to 25 times that of the lowest paid full-time worker in the same firm. For example, if the lowest paid worker at a business is the filing clerk who makes $10,000 a year, the business will only be allowed to deduct $250,000 (25 times $10,000) in salary and bonuses per executive.
This bill would not limit pay. It simply states that our government should not, through the tax code, subsidize excessive pay. If companies want to receive these tax deductions, they must examine how they pay their employees.
What You Can Do
Many Americans are concerned about their economic insecurity and about the excessive pay that many CEOs have. This bill is one vehicle for making the public and policy makers aware of the inequities. While the bill is only one step toward real corporate responsibility, it will change things for the better and it also provides a way to talk with people about economic justice. Here a several things you can do to advance these issues:
- Tell your Representative and Senators you think Congressman Sabo's Income Equity Act is a positive step forward. Encourage them to become a co-sponsor of the bill if they are not yet sponsoring it (see below for a list of co-sponsors). Urge them to support hearings in Congress on the bill. To contact your members of Congress write or call them at:
| Senator _____ | Representative _____ |
| US Senate | US House of Representatives |
| Washington DC 20510 | Washington DC 20515 |
| (202) 224-3121 | (202) 225-3121 |
- Rally Your Co-workers and the Community. When it comes to excessive CEO pay and corporate practices that threaten jobs, no one has more at stake than workers and their communities. Raise the issue at a community, church or union meeting - ask people to write to their representatives in support of the Sabo bill. Write to your local newspaper about this issue.
- Call on the Regulators. The Securities and Exchange Commission (SEC)is the federal regulatory agency that oversees all publicly held corporations, and requires these corporations to file reports which help investors make informed choices about their investments. Send a letter to the SEC urging them to change their rules and require full disclosure of CEO compensation.
Background
The ranks of the "working poor" in America continue to grow. The Census Bureau reported last year that the percentage of gainfully employed Americans who earn less than poverty-level wages is continuing to rise. The study showed that in 1994, 16% of full-time workers could not keep their families above the poverty line -- compared to 12% in 1979. While more workers are poor, executive pay has continued to rise.
Real wages are dropping because of several factors, such as global corporate restructuring, the deunionization of workers, the shift toward lower-paying industries, declining value of the minimum wage, increased part-time and other contingent work, growing unemployment, automation, and other trends. A wage ratio, such as that created by the Income Equity Act would create a new linkage between workers and management and management and top management that has eroded over the last few decades. If a Fortune 500 company wants to pay their CEO over 200 times the average U.S. worker and still write off those expenses, then it must find a way to elevate the bottom wage also to receive that benefit.
Bill Summary & Status for the 105th Congress
H.R.687 - Income Equity Act of 1997
SPONSOR: Rep Martin Sabo (introduced 02/11/97)
Summary of HR 687
A bill to amend the Internal Revenue Code of 1986 to deny employers a deduction for payments of excessive compensation to CEOs.
Chief Sponsor: Rep Martin Sabo (D-MN)
39 Co-Sponsors:
Rep Thomas Barrett (D-WI)
*Rep Corinne Brown (D-FL)
*Rep Sherrod Brown (D-OH)
*Rep Julia Carson (D-IN)
Rep Donna Christian-Green (D-VI)
*Rep John Conyers (D-MI)
*Rep Danny Davis (D-IL)
*Rep Peter DeFazio (D-OR)
Rep William Delahunt (D-MA)
*Rep Ron Dellums (D-CA)
Rep Phil English (D-PA)
*Rep Lane Evans (D-IL)
*Rep Chaka Fattah (D-PA)
*Rep Bob Filner (D-CA)
Rep Thomas Foglietta (D-PA)
*Rep Barney Frank (D-MA)
*Rep Luis Gutierrez (D-IL)
*Rep Maurice Hinchey (D-NY)
Rep Ron Kind (D-WI)
*Rep Dennis Kucinich (D-OH)
*Rep John Lewis (D-GA)
Rep William Lipinski (D-IL)
Rep Edward Markey (D-MA)
Rep Matthew Martinez (D-CA)
*Rep James McDermott (D-WA)
*Rep James McGovern (D-MA)
*Rep Cynthia McKinney (D-GA)
*Rep George Miller (D-CA)
Rep Joe Moakley (D-MA)
*Rep Eleanor Holmes Norton (D-DC)
vRep John Olver (D-MA)
*Rep Major Owens (D-NY)
*Rep Bernie Sanders (I-VT)
Rep Ted Strickland (D-OH)
*Rep John Tierney (D-MA)
Rep Edolphus Towns (D-NY)
*Rep Nydia Velazquez (D-NY)
Rep Bruce Vento (D-MN)
Rep Albert Wynn (D-MD)
[In the list of co-sponsors, members of the Progressive Caucus are starred.]
Some of the above material is courtesy of United for a Fair Economy. For more information contact them at 37 Temple Pl, 3rd Floor, Boston MA 02111; 617-423-2148, Fax: 617-695-1295
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