Independent Vermont Sen. Bernie Sanders – a 2020 presidential candidate – has proposed ending another tax break for Wall Street executives who have found themselves on the receiving end of many of his taxation initiatives.
On Thursday, Sanders released a plan called the CEO and Worker Pension Fairness Act, which would end certain perks for executive retirement plans in order to bolster funding for 1.7 million U.S. workers’ pensions plans.
Sanders is specifically targeting executive retirement plans, which are selectively given to key executives in order to incentivize them to stay with a company. It is a non-qualified plan, meaning it does not have to follow specific IRS rules on other plans – like a 401(k) or a pension. These plans allow executives to defer income to put into the account, along with stock options. Because the money is not taken as income, taxes are also deferred until withdrawal. The bill would, however, require executives to pay taxes on income deferred into the account sooner and impose more reporting requirements. It would also change how stock options are taxed.
The plan would raise an estimated $15 billion, according to Sanders’ office. It is being co-sponsored by Maryland Democrat Sen. Chris Van Hollen.
“It is outrageous that a corporate executive in America can get unlimited, special tax privileges on hundreds of millions of dollars in savings, while an ordinary worker can only get tax deferment of up to $19,500 on a 401(k),” Sanders said in a statement. “We are going to end these tax breaks for CEOs and use that money to protect 1.7 million workers who are worried about a decent retirement as they face instability in their current pension plans.”
The pair of senators cited data from the Government Accountability Office, which found that 2,300 top executives have more than $13 billion saved in these accounts – with the average CEO having $14 million. The plans are also subject to little oversight after their creation.
The proposal also comes as Sanders targets union support in his bid to win the 2020 Democratic nomination. He has won three of the early primary contests – including a tie in Iowa.
However, $15 billion would not go very far toward addressing the pension plan funding gap. As of fiscal 2017, state pension plans had a combined $1.28 trillion deficit.