Under current law, corporations maintain two sets of books: one to show shareholders (per Securities and Exchange Commission) and one to show Uncle Sam (per tax code). The two books are often conflicting and allow corporations to simultaneously declare both large and small profits, large and small losses, or profit and loss. One set of books is advantageous for the share price while the other is a means to avoid paying taxes, sticking non-shareholding Americans with larger tax bills.

Yesterday, however, saw an all-too-rare occurrence in Congress. Sens. Carl Levin (D-MI) and John McCain (R-AZ) introduced a bill that would reduce, to some extent, the differences between corporations' books. (sorry, no link)

Sens. Carl Levin (D-Mich) and John McCain (R-Ariz.) July 22 introduced legislation prohibiting corporations from taking tax deductions for stock option compensation greater than the stock option book expenses shown on their financial statements.

The two senators cited a "mismatch" between the treatment of stock options on companies' books and their treatment for tax purposes, and said the bill is intended to curb excessive tax deductions.

"Current stock option accounting and tax rules are out of kilter," Levin said in a news release, thus creating opportunities for "huge tax windfalls for companies that pay their executives with large stock option grants."

He cited Internal Revenue Service data showing that from 2005 to 2006, among the nation's largest companies filing the Schedule M-3, corporate stock option tax deductions totaled about $61 billion more than the stock option expenses on their books.

Ideally, tax and SEC accounting statements should be identical. This bill, which probably will never see either chamber's floor, is good start, however.