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Subsidizing the CEOs

Posted on Aug 16, 2012
Institute for Policy Studies

Twenty-six of the nation’s largest corporations paid their CEOs more than they spent on taxes in 2011, according to a report by the Institute for Policy Studies.

“Our nation’s tax code has become a powerful enabler of bloated CEO pay,” says the report, which documents how American tax dollars have been diverted from public services to the accounts of executives at the nation’s biggest banks and corporations.

Americans are subsidizing CEO paychecks at a time when budget cuts have cost people 627,000 public service jobs since June 2009.

Josh Harkinson at Mother Jones explains some of how it’s done. First, there is no limit on the amount of executive compensation corporations can deduct from their taxable income as an expense. Second, there is similarly no limit on how much of their income CEOs can legally shield from taxes. Third, executives who get paid in stock rather than salary can pay taxes on a 15 percent capital gains rate rather than the 35 percent that applies to standard income. And finally, corporations can make additional money on stocks by delaying deductions taken from executive stock options until after their value has swelled.

Those loopholes amount to $14 billion a year in costs to Uncle Sam.

See some of the Institute for Policy Studies’ key findings below, then read the full report here.

—Posted by Alexander Reed Kelly.

Institute for Policy Studies:

• Of last year’s 100 highest-paid U.S. corporate chief executives, 26 took home more in CEO pay than their companies paid in federal income taxes, up from the 25 we noted in last year’s analysis. Seven firms made the list in both 2011 and 2010.

• The CEOs of these 26 firms received $20.4 million in average total compensation last year. That’s a 23 percent increase over the average for last year’s list of 2010’s tax dodging executives

• The four most direct tax subsidies for excessive executive pay cost taxpayers an estimated $14.4 billion per year—$46 for every American man, woman, and child. That amount could also cover the annual cost of hiring 211,732 elementary-school teachers or creating 241,593 clean-energy jobs.

• CEOs have benefited enormously from the Bush tax cuts for upper-income taxpayers. Last year, 57 CEOs saved more than $1 million on their personal income tax bills, thanks to these Bush-era cuts.

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