SB 405 - HB 431
FISCAL NOTE
Fiscal Review Committee
Tennessee General Assembly
February 3, 2025
Fiscal Analyst: Elizabeth Bransford | Email: elizabeth.bransford@capitol.tn.gov | Phone: 615-741-2564
SB 405 - HB 431
SUMMARY OF BILL: Enacts the CEO Pay Disparity Tax Act. Imposes an additional 0.1
percent rate of surcharge on a company’s net earnings for excise tax purposes, to be paid in the
fiscal year following when business was conducted, if the company’s top executive is paid at least
100 times more than the median income of the company’s employees.
FISCAL IMPACT:
STATE GOVERNMENT
REVENUE General Fund
FY25-26 >$3,144,600
FY26-27 & Subsequent Years >$7,861,600
Assumptions:
• According to a 2023 study by the Economic Policy Institute, the average CEO of the 350
largest firms made 290 times more in realized income than the average worker in 2023.
• Excise tax collections were $2,788,646,062 in FY23-24.
• Fiscal Review Committee staff estimates franchise and excise tax collection growth of
negative 11.57 percent in FY24-25 and positive 3.61 percent in FY25-26.
• Excise tax collections are estimated to be $2,555,022,302 {[$2,788,646,062 +
($2,788,646,062 x -0.1157)] x 1.0361} in FY25-26. For the purpose of this fiscal analysis,
this number is assumed to remain constant into perpetuity.
• Pursuant to Tenn. Code Ann. § 67-4-2007(a), the excise tax is 6.5 percent of the net
earnings for the preceding fiscal year for business done in the state of Tennessee.
• Earnings subject to the excise tax are therefore estimated to be $39,308,035,415
($2,555,022,302 / 6.5%) in FY25-26. This number is assumed to remain constant into
perpetuity.
• It can be reasonably assumed that at least 20 percent, or $7,861,607,083 ($39,308,035,415 x
20%), of excise tax earnings will be from companies where the CEO makes at least 100
times more than the median income of the company’s employees.
• The proposed legislation applies to tax years beginning on or after July 1, 2025; therefore,
approximately 40 percent of a full year impact will be collected in FY25-26.
• The increase in state revenue as a result of the proposed legislation is estimated to exceed
$3,144,643 [($7,861,607,083 x 0.1%) x 40%] in FY25-26 and exceed $7,861,607
($7,861,607,083 x 0.1%) in FY26-27 and subsequent years.
SB 405 - HB 431 2
CERTIFICATION:
The information contained herein is true and correct to the best of my knowledge.
Bojan Savic, Executive Director