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Mass. lawmaker files bill to tax excessive executive pay based on CEO-to-worker pay ratio
Summary
Representative Erika Uyterhoeven filed legislation Jan. 9 that would impose higher corporate tax rates on companies doing business in Massachusetts whose top executive pay exceeds the company median by set ratios, effective Jan. 1, 2026.
Representative Erika Uyterhoeven of Somerville filed legislation Jan. 9 that would create a surtax on corporations doing business in Massachusetts whose executive-to-worker pay ratios exceed specified thresholds.
The bill, House No. 3261, would apply to corporations with net income of $10,000,000 or more and determine an annual “compensation ratio” by dividing the average of the chief executive officer’s (or highest paid executive’s) compensation over the three preceding calendar years by the company’s U.S. median employee compensation for the prior calendar year.
Under the proposal, the applicable corporate tax rate would be the base corporate rate under chapter 63 plus an additional percentage based on that compensation ratio: no increase at ratios up to 50; +1 percentage point for ratios over 50 up to 100; +2 points for over 100 up to 200; +4 points for over 200 up to 300; +6 points for over 300 up to 400; +8 points for over 400 up to 500; and +10 points for ratios over 500. The bill retains the requirement that the tax not fall below the minimum tax specified in section two of chapter 63 of the General Laws.
The bill defines “compensation” for chief executives and other highest-paid employees as the total compensation reported in the Summary Compensation Table filed with the U.S. Securities and Exchange Commission under Item 402 of Regulation S‑K. For other employees, “compensation” is wages as defined in section 1 of chapter 63. The median compensation calculation would include contracted employees working in the United States.
A separate provision would increase the applicable tax rate by 50 percent if, in a taxable year, the taxpayer’s total full‑time equivalent U.S. employees fall by more than 10 percent from the prior year while contracted or foreign full‑time equivalent employees increase compared with the preceding year. For taxpayers commencing business in the state during the taxable year, the prior‑year employee counts would be zero under the bill.
The act would take effect for the tax year beginning Jan. 1, 2026, if enacted. The filing text does not include fiscal estimates, committee referrals, or statements of support or opposition.
