On a voice vote, the Senate Finance Committee approved a bill that would curb one element -- deferred compensation -- of the sometimes exorbitant pay packages awarded to corporate executives.The committee agreed to change rules that allow some executives to collect millions of dollars in tax-deferred accounts. According to congressional estimates, limiting that perk would raise upwards of $800 million over the next decade.
The plans allow the executives to put part of their income into an account without immediately paying taxes. The money earns interest, which also isn't immediately taxed. After retirement, executives withdraw money and then pay taxes on it -- but the earlier tax deferrals allow accounts to often grow much larger than an ordinary savings account would have.
The measure approved would limit the amount an executive could put in such a plan to $1 million a year, or the amount of the executive's annual salary -- whichever is less. Any executive exceeding the allowable amount would be forced to pay taxes on all income deferred after Dec. 31, 2006, plus a 20-percent penalty.
The deferred compensation proposal is expected to be part of a larger tax bill, with breaks for smaller companies balanced by efforts to tax larger corporations. That bill would then be merger with a Democratic proposal to raise the minimum wage to $7.25 an hour, from the current $5.15, which already passed the House. The Senate is expected to take up the issue as soon as next week.
