Study: Companies Pay Their Senior Executives More Than They Pay In Federal Taxes

The Institute For Policy Studies released the results of a study of executive compensation and corporate taxes. Researchers analyzed the pay of Chief Executive Officers (CEOs) in the largest corporation and the highest paid CEOs. Key findings were:

"Of America’s 30 largest corporations, seven (23 percent) paid their CEOs more than they paid in federal income taxes last year... Of America’s 100 highest-paid CEOs, 29 received more in pay last year than their company paid in federal income taxes—up from 25 out of the top 100 in our 2010 and 2011 surveys."

The pay of those 29 CEOs averaged $32 million. The study also investigated tax shelters. The 29 corporations that paid more to their CEOs than federal income taxes also operated:

"... 237 subsidiaries in tax havens. The company with the most subsidiaries in tax havens was Abbott Laboratories, with 79. The pharmaceutical firm’s CEO paycheck was $4 million larger than its IRS bill in 2013. Of the 29 firms, only 12 reported U.S. losses in 2013. At these 12 unprofitable firms, CEO pay averaged $36.6 million—more than three times the $11.7 million national average for large company CEOs..."

The corporations are familiar brands and names:

"The company that received the largest tax refund was Citigroup, which owes its existence to taxpayer bailouts. In 2013, Citi paid its CEO $18 million while pocketing an IRS refund of $260 million. Three firms have made the list in all three years surveyed. Boeing, Chesapeake Energy, and Ford Motors paid their CEO more than Uncle Sam in 2010, 2011, and 2013."

It would seem that the shareholders at these 12 unprofitable firms either don't care or have allowed the boards of directors to authorize exorbitant pay packages in the face of unprofitable performances. If those seven largest, profitable corporations had paid the full statutory tax rate of 35 percent, they would have paid $25.9 billion in federal taxes, which could have been used instead for:

"... Restoring elementary and high school teaching jobs lost to recession and austerity budget cuts... Resurfacing 22,240 miles of four-lane roads... Running the U.S. Department of Veterans Affairs for two months... Making pre-K [educaton] universal..."

The authors, Scott Klinger and Sarah Anderson, concluded:

"For corporations to reward one individual, no matter how talented, more than they are contributing to the cost of all the public services needed for business success reflects the deep flaws in our corporate tax system. Rather than more tax breaks, Congress should focus on addressing these deep flaws by cracking down on the use of tax havens, eliminating wasteful corporate subsidies, and closing loopholes that encourage excessive executive compensation."

Some specific actions Congress could take (links added):

"... the CUT Loopholes Act would close a variety of loopholes that facilitate tax dodging through offshoring. This bill would treat the foreign subsidiaries of U.S. corporations, whose management and control occur primarily in the United States, as U.S. domestic corporations for income tax purposes. It would also force corporations to take the same expense for stock option grants on their tax returns as they report on their shareholder books... Passing this legislation would reduce the incentive to shift profits and jobs overseas and could raise an additional $189 billion over ten years without raising corporate tax rates... Corporate Tax Fairness Act (S. 250 and H.R. 694)... would eliminate the ability of corporations to defer tax payments on their offshore profits. Instead, all worldwide profits earned by U.S. corporations would be immediately taxable in the United States. Firms would receive a dollar-for-dollar tax credit for any taxes paid to foreign governments. Corporations earning their profits in places like the United Kingdom, Germany, or France, where effective corporate tax rates are similar to U.S. rates, would pay little if any additional tax to the U.S. government. But firms stashing their profits in offshore tax havens would be forced to pay up for their years of tax haven abuse. The bill would raise an estimated $590 billion over ten years."

Download the report, "Fleecing Uncle Sam" (Adobe PDF). A copy is also available here.