7 CEOs Collecting Larger Paychecks Than Uncle Sam
The nation’s tax code is once again rearing its ugly, contentious head. Although business is booming for Corporate America by way of higher profits and share prices, some of the largest companies in the country are spending more money on executive compensation than federal income taxes.
Uncle Sam’s pay package appears woefully undersized. Of America’s 30 largest corporations, seven paid their CEOs more than they paid in federal income taxes last year, according to a new analysis from the Institute for Policy Studies, a left-leaning think tank in the nation’s capital. All seven firms were profitable, collectively posting more than $74 billion in domestic pre-tax profits. Yet they received a combined total of $1.9 billion in refunds from the IRS, resulting in an effective tax rate of -2.5%. On average, these seven CEOs were paid $17.3 million last year.
As the table above shows, Boeing’s CEO tops the list with total compensation of $23.3 billion and a -1.4% effective tax rate. However, TARP bailout recipients J.P. Morgan and Citigroup have the most advantageous effective tax rate at -7.6% and -4.2%, respectively. Boeing and Ford have made the list in all three years surveyed (2010, 2011, and 2013).
“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,” explains the report. “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.”
While some tax breaks do have a redeeming social value, the Institute for Policy Studies highlights that most tax breaks reward companies for actions they would have done regardless, or for things that deserve no encouragement from taxpayers. For example, the 2009 Economic Stimulus Act expanded accelerated depreciation benefits, which allow companies to write off the value of their investment in buildings and equipment more quickly than the useful life of the asset. This benefit was sold as temporary relief, but heavy lobbying has made it a permanent fixture of the tax code, costing taxpayers an estimated $287 billion over the next 10 years.
Operating tax havens in locations such as the Caribbean and Switzerland is another popular method to legally reduce tax bills. Out of America’s 100 highest-paid CEOs, 29 received more pay in 2013 than their company paid in federal income taxes. These 29 firms operated 237 subsidiaries in tax havens last year.
“With taxpayers picking up a greater share of the everyday costs of running a business, corporations are not taking their freed-up cash to expand their operations and create much-needed jobs,” explains the report. “Instead, they are using their profits to buy back their stock, which in turn boosts their stock prices and ultimately sends CEO pay soaring. And in perhaps the greatest travesty of all, America’s corporations then ask the nation’s working families to pick up part of the cost of paying CEOs, most of whom earn more in a year than most of their low-level workers could earn in several lifetimes.”
Follow Eric on Twitter @Mr_Eric_WSCS
More from Personal Finance Cheat Sheet:
- 6 States Where Average Student Debt Is Over $30K
- America’s Top Money Problem: Trying to Make Ends Meet
- 10 States Where Home Prices Are Still Surging