Opposition from business to the current Senate Finance Committee proposal for raising executive compensation taxes is gathering force–although it will have to buck a tide of public sentiment that top management is making out like bandits in both tax treatment and compensation. Financial Executives International (FEI)–the professional association representing some 15,000 CFOs, controllers and other finance executives–shot off a letter to Capitol Hill, protesting the congressional attempt to resurrect sections 409A and 162(m) of the tax code.

According to FEI, these two revenue-raising tax provisions would undermine U.S. competitiveness. The proposals were part of the Senate version of the Small Business and Work Opportunity Act of 2007 (H.R. 1591) and aimed squarely at excessive executive compensation and retirement packages.

The proposed amendment to 409A would impose a dollar cap on the aggregate annual amount of compensation that may be deferred by any individual into a qualified pension plan. The cap would be equal to the lesser of $1 million or the individual's average annual compensation over the previous five years. If there were any deferrals in excess of this limit, then all deferrals would be subject to current tax rates, interest at the underpayment rate plus 1%, and a 20% penalty.