Tax Excessive CEO Pay Act of 2025
- Bill Number
- H.R. 5298
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-09-11: Referred to the House Committee on Ways and Means.
- Last Updated
- 2026-05-14T08:07:36Z
AI-Generated Summary
Purpose This legislation aims to discourage excessive executive compensation by increasing corporate tax rates for companies where the pay ratio between the highest-compensated employee and the median worker exceeds 50 to 1.
Key Provisions
- Amends Section 11 of the Internal Revenue Code to add a new subsection imposing a tax rate increase on applicable corporations.
- The increase applies when the pay ratio (calculated per SEC rules in 17 CFR 229.402(u), averaged over five years) exceeds 50 to 1, with graduated penalties:
- 0.5 percentage points for ratios >50:1 but ≤100:1.
- 1 percentage point for >100:1 but ≤200:1.
- 2 percentage points for >200:1 but ≤300:1.
- 3 percentage points for >300:1 but ≤400:1.
- 4 percentage points for >400:1 but ≤500:1.
- 5 percentage points for >500:1.
- Requires large private corporations (average annual gross receipts ≥$100 million over three years) to calculate and report the ratio using methods prescribed by the Secretary of the Treasury.
- Exempts smaller private corporations (average annual gross receipts <$100 million).
- Directs the Secretary to issue regulations preventing avoidance, such as workforce manipulation via contractors.
- Applies to taxable years beginning after December 31, 2025.
- Makes conforming amendments to other Code sections to account for the adjusted rate.
Significant Changes to Existing Law
- Introduces a new pay-ratio-based surcharge on the existing 21% corporate tax rate under Section 11(b).
- Extends pay-ratio reporting and tax consequences to certain private corporations not previously subject to SEC disclosure rules.
- Creates a graduated penalty structure tied directly to compensation disparities.
Potential Impacts
- Government agencies: The IRS would administer the new rate calculations, audits, and regulations, potentially increasing compliance oversight.
- Citizens: Could affect workers at covered companies through possible adjustments in compensation structures or business decisions.
- International relations: No direct effects identified in the legislation.
Main Stakeholders Affected
- Publicly traded corporations and large private companies with high executive-to-worker pay ratios.
- Executive officers and median employees at those companies.
- The Department of the Treasury and IRS for implementation and enforcement.
- Shareholders and investors in affected corporations.
Notable Legal, Constitutional, or Political Implications
- Operates within Congress’s authority to set tax rates and may face challenges regarding equal protection or regulatory authority over private firms.
- Relies on existing SEC definitions but extends them administratively to non-public entities.
- Includes anti-avoidance measures that grant the Treasury broad regulatory power.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (29)
Rep. Pingree, Chellie [D-ME-1], Rep. Huffman, Jared [D-CA-2], Rep. Ramirez, Delia C. [D-IL-3], Rep. McGovern, James P. [D-MA-2], Rep. Omar, Ilhan [D-MN-5], Rep. Khanna, Ro [D-CA-17], Rep. Meng, Grace [D-NY-6], Rep. Simon, Lateefah [D-CA-12], Rep. García, Jesús G. "Chuy" [D-IL-4], Rep. Jayapal, Pramila [D-WA-7], Rep. Deluzio, Christopher R. [D-PA-17], Rep. Watson Coleman, Bonnie [D-NJ-12], Rep. Clarke, Yvette D. [D-NY-9], Rep. Balint, Becca [D-VT-At Large], Rep. Pressley, Ayanna [D-MA-7], Rep. Pallone, Frank [D-NJ-6], Rep. Lee, Summer L. [D-PA-12], Rep. Jackson, Jonathan L. [D-IL-1], Rep. Randall, Emily [D-WA-6], Rep. Mfume, Kweisi [D-MD-7], Rep. Casar, Greg [D-TX-35], Del. Norton, Eleanor Holmes [D-DC-At Large], Rep. Thanedar, Shri [D-MI-13], Rep. Brownley, Julia [D-CA-26], Rep. Cohen, Steve [D-TN-9], Rep. Goldman, Daniel S. [D-NY-10], Rep. Foushee, Valerie P. [D-NC-4], Rep. Dexter, Maxine [D-OR-3], Rep. Grijalva, Adelita S. [D-AZ-7]
Recent Actions
- 2025-09-11: Referred to the House Committee on Ways and Means.
- 2025-09-10: Introduced in House
- 2025-09-10: Sponsor introductory remarks on measure. (CR H4168-4169)
- 2025-09-10: Introduced in House
Bill Versions
- Tax Excessive CEO Pay Act of 2025 — issued 2025-09-11 — PDF (5 pages)