Oh boy. Here’s one of those stories where you can huff and puff and try to blow the house down. But unless you have the wind of Hurricane Irene, nothing is going to change. Let’s stew this early a.m. on CEO pay, corporate taxes and taxing those who are accumulating real wealth because of legal tax breaks and loopholes.
The Institute for Policy Studies, described in the NYT and elsewhere as a “liberal-leaning research group” released a study yesterday showing that the CEOs at many of the big-name USA corporations make more than the companies pay in taxes. And the backstory: this comes at a time when many are arguing that corporate tax rates are too high and only Warren ‘Please Tax Me More’ Buffett is pushing for individuals at the top of the income totem pole to pay more taxes.
Here’s from a NYT article “Where Pay for Chiefs Outstrips U.S. Taxes“:
At least 25 top United States companies paid more to their chief executives in 2010 than they did to the federal government in taxes, according to a study released on Wednesday.
The companies — which include household names like eBay, Boeing, General Electric and Verizon — averaged $1.9 billion each in profits, according to the study by the Institute for Policy Studies, a liberal-leaning research group. But a variety of shelters, loopholes and tax reduction strategies allowed the companies to average more than $400 million each in tax benefits — which can be taken as a refund or used as write-off against earnings in future years.
The chief executives of those companies were paid an average of more than $16 million a year, the study found, a figure substantially higher than the $10.8 million average for all companies in the Standard & Poor’s 500-stock index.
The financial data in the report was taken from the companies’ regulatory filings, which can differ from what is actually filed on a corporate tax return. Even in a year when a company claims an overall tax benefit, it may pay some cash taxes while accumulating credits that can be redeemed in future years. For instance, General Electric reported a federal tax benefit of more than $3 billion in 2010, but company officials said they still expected to pay a small amount of cash taxes.
The authors of the study, which examined the regulatory filings of the 100 companies with the best-paid chief executives, said that their findings suggested that current United States policy was rewarding tax avoidance rather than innovation.
“We have no evidence that C.E.O.’s are fashioning, with their executive leadership, more effective and efficient enterprises,” the study concluded. “On the other hand, ample evidence suggests that C.E.O.’s and their corporations are expending considerably more energy on avoiding taxes than perhaps ever before — at a time when the federal government desperately needs more revenue to maintain basic services for the American people.”
Well, you can argue that the nation has a spending problem not a revenue problem. But I’ll let the members of the new super committee in Congress wrestle with that issue until they punt right before Thanksgiving. Oops. I digress.
Back to CEO pay and corporate taxes.
Politico opines, “Study: CEO pay tops tax bill”:
The report revealed eBay paid CEO John Donahoe $12.4 million — but reported a $131 million refund on its 2010 federal income taxes. And at General Electric, where CEO Jeff Immelt raked in $15.2 million, the company received a $3.3 billion refund and dropped $41.8 million on lobbying and political campaigns. And at Boeing, CEO Jim McNerney takes home $13.8 million, while the company paid $13 million in taxes and spent $20.8 million on lobbying in 2010.
On average, S&P 500 CEOs make $10.8 million.
Note to self: Is that the same Jeff Immelt who is Obama’s Jobs Czar — but who has been mostly of late creating jobs in China?
Another note to self: You can bet that most of the CEO pay comes in ways — stock options, for instance — that escape the tax bite that the rest of us pay on regular earnings. Tax reform, anyone? Sorry. I digress again.
Back to Politico and the story about CEO pay and corporate taxes:
Rep. Elijah Cummings (D-Md.), the ranking member on the Committee on Oversight and Government Reform, immediately called for hearings on CEO pay after reading the study, Reuters reported.
Cummings sent a letter to committee chair Rep. Darrell Issa (R-Calif.) asking “to examine the extent to which the problems in CEO compensation that led to the economic crisis continue to exist today” and “the extent to which our tax code may be encouraging these growing disparities.” He also sought an inquiry into “why CEO pay and corporate profits are skyrocketing while worker pay stagnates and unemployment remains unacceptably high.”
I see a congressional hearing on this in the near future — with CEOs heading to the dock for a symbolic flogging. And perhaps Warren Buffett should be first up to the plate.
It appears his company, Berkshire Hathaway, has been grappling with the IRS for more than a decade over $1 billion or more in taxes.
Huff. Puff. Ain’t nothing coming down.