Dear Member of Congress:
The undersigned organizations support a broad range of progressive revenue raisers to pay for
the vital public investments in President Biden’s Build Back Better plans to address human
needs and climate change. This letter highlights four specific revenue proposals now under
consideration that deserve more attention.
Each of these proposals would raise significant revenue while curbing a key driver of our
nation’s skyrocketing inequality — excessive CEO pay. Americans across the political spectrum
have been outraged about overpaid CEOs for a long time. During the pandemic crisis, top
executives have further enriched themselves while workers — particularly workers of color —
lost hours, jobs, and lives. Now is the time to use tax policy to narrow these gaps.
1. CEO pay ratio tax
Senate Finance Chair Ron Wyden has reportedly developed a list of revenue options that
includes an excise tax on corporations with big gaps between CEO and worker pay. In a letter
to Congress earlier this year, many of our organizations endorsed a similar proposal, the Tax
Excessive CEO Pay Act. Such taxes would give corporations an incentive to narrow their pay
gaps by lifting up worker wages and reining in CEO compensation. The tax would also
discourage the outrageous levels of compensation that give executives an incentive to take
excessive risks. Wall Street’s reckless “bonus culture” proved a key factor in the 2008 financial
2. Stock buybacks tax
On September 10, Chair Wyden and Senator Sherrod Brown unveiled a bill that fleshes out
another option on the revenue list — a stock buyback tax. The Stock Buyback Accountability Act
would impose a 2% excise tax on the amount spent by a publicly traded company on share
repurchases. As business analysts have long documented, such stock buybacks artificially
inflate executives’ stock-based pay. Taxing buybacks could help curb such unearned executive
windfalls while encouraging investment in human capital, research and development, and other
3. Carried interest loophole
Under current rules, executives of private equity, real estate, and hedge funds pay the
capital-gains tax rate on so-called “carried interest” (earnings tied to a percentage of the fund’s
profits) — instead of the significantly higher ordinary income tax rate. As a result, wealthy Wall
Street fund managers pay a lower tax rate than millions of our country’s teachers, firefighters,
and nurses. Chair Wyden has introduced a bill to treat carried interest as ordinary income, as
the Biden administration, Senators Tammy Baldwin, Elizabeth Warren, and others have
proposed. Wyden’s bill would also require managers to pay an annual tax on accrued carried
interest, generating a total of $63 billion over a decade.
4. Bonus deductibility cap
Another option on Chair Wyden’s list would “expand restrictions on business deductions for
employees making more than $1 million.” A 1993 tax reform created a huge loophole that
allowed corporations to deduct unlimited amounts of executive pay off their taxable income —
as long as that pay was in stock options or other forms of so-called “performance” pay. In other
words, the more corporations paid their CEO, the less they owed in taxes. Subsequent reforms
have partially closed this loophole by setting a $1 million deductibility cap on all compensation
going to a company’s top 10 executives. Congress should consider extending this cap to all
employees, as proposed in the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act.
Taxpayers shouldn’t have to subsidize any mega-million-dollar salaries.
For too long, we have tolerated a corporate business model that funnels resources into bloated
executive compensation instead of supporting working families and a tax system that is rigged
in favor of CEOs and other wealthy Americans. The pandemic has only exacerbated the
inequities that hold our country back and make us more vulnerable to crises of all sorts.
We urge you to support these and other tax reforms that would reduce our nation’s extreme
inequality and generate revenue for vital public investments.
Take on Wall Street
Americans for Financial Reform
Communications Workers of America
International Brotherhood of Teamsters
Institute for Policy Studies, Global Economy Project
Network Lobby for Catholic Social Justice
United For Respect