Executive compensation will be the focus of legislators again tomorrow as the Senate will vote on new tax legislation designed to impose higher taxes on executives, Wall Street banks, and other large companies. The move comes as the Democrat-controlled Congress continues to close loopholes and increase the costs of fraud in order to fund promised tax relief for the middle class and businesses. The new legislation, which will likely become law in a few months, could add up a collective $800 million tax bill for U.S. executives. The money will then be used to offset the costs of more than $8 billion in tax relief for small businesses hit by the upcoming rise in the minimum wage.

Specifically, the new legislation limits the amount of money that can be classified as "deferred compensation". While old laws allowed millions of dollars to be deferred (and therefore tax free), new legislation would limit this amount to just $1 million per year or the average of the previous five years salary (whichever is lower). Any amount above that would incur a hefty 20% penalty. The measures, however, were criticized by business organizations and executive pay consultants, who insist that they will encourage companies to pay higher salaries and bonuses to compensate for the higher taxes. Whether this is true or not remains to be seen; however, this is definitely a story to follow.