Feb. 27 (Bloomberg) — U.S. companies would be prohibited from taking income-tax deductions for their top executives' pay exceeding $1 million, even if it's based on performance, under a plan from the top Republican tax writer in Congress.

The proposal, released yesterday by Representative Dave Camp of Michigan, would tighten rules that Congress first put in place in 1993. Current law exempts performance-based pay from the $1 million limit. That encourages companies to raise base salaries to that level and reward executives with options, said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.

The executive compensation change would raise $12.1 billion over 10 years and help finance lower tax rates. Camp's broader tax plan, which isn't expected to become law this year, is a blueprint for future efforts to revamp the tax code. Companies and business groups are trying to prevent provisions that harm them from advancing.

Elson said he didn't think the proposal would curb executive pay packages significantly, because tax policy tends to encourage creative evasion techniques and because companies will look for ways to pass along the costs.

Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.

  • Critical BenefitsPRO information including cutting edge post-reform success strategies, access to educational webcasts and videos, resources from industry leaders, and informative Newsletters.
  • Exclusive discounts on ALM, BenefitsPRO magazine and BenefitsPRO.com events
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.