The Tennessee State Legislature has introduced Senate Bill 405, known as the "CEO Pay Disparity Tax Act," aimed at addressing income inequality within corporations operating in the state. Introduced by Senator Lamar on February 12, 2025, the bill proposes a surcharge on companies whose top executives earn at least 100 times more than the median income of their employees.

The key provision of the bill mandates that these companies will incur an additional tax of 0.1% on their net earnings, calculated based on the excise tax rate for the previous fiscal year. This surcharge is intended to encourage companies to reevaluate their pay structures and promote a more equitable distribution of income among their workforce.

The bill has sparked notable debate among lawmakers and stakeholders. Proponents argue that it is a necessary step to combat growing income inequality and hold corporations accountable for excessive executive compensation. Critics, however, express concerns that the surcharge could deter businesses from operating in Tennessee, potentially leading to job losses and reduced economic growth.

The implications of Senate Bill 405 extend beyond taxation; it reflects a broader societal push for corporate responsibility and fair wages. Experts suggest that if enacted, the bill could influence corporate governance practices and encourage companies to adopt more equitable pay policies. The legislation is set to take effect on July 1, 2025, for tax years beginning thereafter, pending further discussions and potential amendments in the legislative process.

As the bill progresses, its impact on Tennessee's business landscape and the ongoing conversation about income disparity will be closely monitored by both supporters and opponents.