AN ACT to amend Tennessee Code Annotated, Title 67, Chapter 4, relative to the "CEO Pay Disparity Tax Act."
The bill, upon its effective date of July 1, 2025, seeks to amend the Tennessee Code Annotated and establish a framework within Title 67, Chapter 4. By implementing a CEO pay disparity surcharge, this legislation is designed to encourage companies to consider more equitable compensation practices and distribute their earnings in a manner that reduces economic inequality within the workforce. The measure could influence businesses' financial strategies and attract debates regarding ethical pay practices in corporate governance.
Senate Bill 0405, known as the 'CEO Pay Disparity Tax Act,' proposes a new tax regulation imposing a surcharge on corporations in Tennessee whose top executive earns at least 100 times the median income of their employees. This legislation aims to address issues of income inequality by targeting companies with significant pay disparities between their executives and average workers. The surcharge will be assessed at a rate of 0.1% on the company's net earnings, complementing the existing excise tax framework in the state.
While the bill advances the discourse on income disparity, it may face significant opposition from various stakeholders. Critics may argue that the legislation could deter businesses from operating in Tennessee, potentially leading to adverse economic effects. Additionally, opponents may feel that this represents government overreach into corporate practices, asserting that companies should retain the autonomy to establish pay structures. The conversations surrounding this bill are likely to focus on balancing corporate freedom with social responsibility, with proponents arguing for the necessity of equity in compensation.