Bill > H3261

This bill establishes a new tax on corporations with net income of $10 million or more, based on the ratio of executive compensation to median employee compensation. The bill defines compensation for executives as the total compensation reported to the Securities and Exchange Commission (SEC), and calculates a "compensation ratio" by comparing the highest-paid executive's average compensation to the median employee compensation. The tax rate is structured progressively, with additional percentage points added to the base corporate tax rate depending on the compensation ratio: no additional tax for ratios up to 50, and escalating additional taxes up to 10% for ratios over 500. An additional penalty is imposed if a company reduces its U.S. full-time workforce by more than 10% while simultaneously increasing contracted or foreign employees, which would trigger a 50% increase in the applicable tax rate. This legislation aims to discourage extreme executive compensation disparities and potential workforce replacement strategies by creating a financial disincentive for companies with high executive-to-worker pay ratios. The bill is set to take effect for the tax year beginning January 1, 2026, and would apply to corporations doing business in the commonwealth.

Budget and Finance

https://malegislature.gov/Bills/194/H3261