Salaries for chief executive officers of major U.S. corporations rose sharply in 2010 despite the weak national economy, and various tax-dodging strategies allowed highly profitable companies to pay little or no corporate income taxes. That’s a small taste of the distubring news from the Institute for Policy Studies’ report on Executive Excess: CEO Rewards for Tax Dodging.
The Washington, DC-based Institute for Policy Studies released their 18th annual report about executive pay on August 31. Click here for the summary. At the same page, you can download a 46-page pdf file containing the full report. Its authors
researched the 100 U.S. corporations that shelled out the most last year in CEO compensation. At 25 of these corporate giants, we found, the bill for chief executive compensation actually ran higher than the company’s entire federal corporate income tax bill.
Various statistics about the 25 companies that paid their CEOs more than they paid in corporate income taxes are listed on pages 31 through 33 of the report. None of those 25 companies are headquartered in Iowa.
From the “key findings” on pages 1 and 2:
CEOs Get More than Uncle Sam
• Of last year’s 100 highest-paid corporate chief executives in the United States, 25 took home more in CEO pay than their company paid in 2010 federal income taxes.
• These 25 CEOs averaged $16.7 million, well above last year’s $10.8 million average for S&P 500 CEOs. Most of the companies they ran actually came out ahead at tax time, collecting tax refunds from the IRS that averaged $304 million.
• CEOs in 22 of these 25 firms enjoyed pay increases in 2010. In 13 of these companies, CEO pay-checks ratcheted up while the corporate income tax bill either declined or the size of the corporate tax refund expanded.
Low Taxes, High Profits
• The 25 firms that paid their CEOs more than Uncle Sam last year reported average global profits of $1.9 billion. Only one of the firms reported negative global returns. Eighteen of the 25 firms last year operated subsidiaries in offshore tax haven jurisdictions. The firms, all combined, had 556 tax haven subsidiaries.
• Only seven of the 25 companies reported losses in U.S. pre-tax income. Five of these companies have a combined total of 267 subsidiaries in tax haven countries and a sixth, Nabors Industries, is headquartered in Bermuda.
• The most profitable of the 25 firms: General Electric. GE last year ranked 14th among U.S. firms in global profitability. GE received a $3.3 billion tax refund, despite reporting a whopping $5.1 billion in U.S. pre-tax income.
Bigger Checks for Influence-Peddling than to the IRS
• Of the 25 companies that paid their CEO more than Uncle Sam, 20 also spent more on lobbying law- makers than they paid in corporate taxes. Eighteen gave more to the political campaigns of their favorite candidates than they paid to the IRS in taxes.
• The most profitable of the firms, General Electric, also ranked tops in lobbying and political cam- paign spending. The company’s total investment in political influence: $41.8 million. Boeing ranked second, with $20.8 million in lobbying and campaign spending, a total 60 percent over the company’s tax payment.
Gap Between CEO and Worker Pay Jumps
• S&P 500 CEOs last year collected $10.8 million in average compensation, a total that includes the value of new stock and options grants awarded during the year. This $10.8 million represented a 27.8 percent compensation increase over 2009.
• The gap between CEO and average U.S. worker pay rose from 263-to-1 in 2009 to 325-to-1 last year.
Politicians talk a good game about hard work and personal responsibility, but the Institute for Policy Studies researchers found “no evidence that CEOs are fashioning, with their executive leadership, more effective and efficient enterprises.” They put tremendous effort into tax avoidance, however. The report describes in detail how tax breaks reward “corporate behaviors […] that are of questionable value to society,” like offshoring of corporate activity. Republican politicians demand lower corporate tax rates, but few large companies are paying anything close to the nominal corporate income tax rate.
Later this year, a “super committee” of six members of Congress will craft a plan to cut the federal deficit and debt. Curbing the use of tax havens and ending some corporate tax breaks could raise federal revenues by more than $100 billion per year, but I would be shocked if the committee endorsed any of the reforms described on pages 22 through 25 of the Institute for Policy Studies report. Politicians who demand endless tax cuts are probably not even aware that U.S. corporate income taxes “added up to 35 percent of all federal government revenue” in 1945 but “will make up just 9 percent of federal receipts” this year.
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UPDATE: Zach Carter and Jordan Howard report that 10 of the CEOs who received more in pay than their companies’ paid in federal income taxes “have substantive ties” to President Obama, “including some who have official economic policy advisory positions in his administration.”
All told, these 10 CEOs with Obama connections brought in over $158 million for themselves last year. Their companies’ federal tax bill, however, was a combined net benefit of $5.4 billion — meaning the federal government actually owed these companies billions of dollars. Eight of the 10 firms not only did not pay taxes, they received large refunds. The 10 companies scored combined U.S. profits of $26.8 billion.
HuffPost’s calculations are based on data compiled in the report by the IPS. The IPS figures, in turn, are drawn from documents the companies filed with the Securities and Exchange Commission.
Obama has repeatedly spoken of improving the corporate tax code by closing special loopholes for politically connected companies and using that money to lower the official corporate tax rate. President Ronald Reagan embarked on a similar project in 1986, enabling the federal government to increase tax revenues even as it lowered the formal tax rates. Although corporate tax revenue is at postwar lows, Obama’s plan is much less ambitious: He doesn’t want to actually increase tax revenues at all. The benefits from closing loopholes would exclusively flow straight to other corporations.