Congress targets extreme CEO pay with graduated corporate tax penalty
H.R. 5298 — Tax Excessive CEO Pay Act of 2025 · Filed by Rashida Tlaib (D-MI) · 29 cosponsors · Introduced Sep 11, 2025 · Referred to committee
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What it does
This bill imposes a graduated corporate income-tax penalty on large corporations (those with $100M+ annual revenue) whose CEO-to-median-worker pay ratio exceeds 50-to-1. The penalty ranges from 0.5 percentage points (for ratios between 50:1 and 100:1) up to 5 percentage points (for ratios above 500:1), added to the standard 21% corporate tax rate. The bill uses SEC pay-ratio disclosure rules as the baseline and applies a 5-year average to smooth year-to-year volatility.
Why we flagged it
The bill's core mechanism is a graduated tax increase on corporations with extreme pay ratios, designed to discourage inequality and raise revenue. It is straightforward in intent and mechanism, though technically complex in implementation.
What the text implies
- The 5-year averaging window may delay the penalty's effect on newly extreme pay ratios, allowing corporations time to adjust compensation structures before facing the full penalty.
- The bill exempts private corporations with less than $100M in annual revenue, potentially creating an incentive for large corporations to restructure or spin off divisions to fall below the threshold.
The full analysis lists 4 implications of this text.
Who stands to gain
U.S. Treasury (revenue increase); Corporations with pay ratios below 50:1 (competitive advantage vs. high-ratio peers)