More likely, Congress will prioritize the renewal of a raft of corporate tax breaks known collectively as “tax extenders.” These are a good deal for America’s largest corporations. In fact, it’s so good a deal that according to a new report by the Institute for Policy Studies and the Center for Effective Government, 29 of the 100 top-paid CEOs in the U.S. got more in compensation than their company’s entire corporate tax bill.
Here are some more facts about executive pay and how it relates to corporate taxes paid:
Of the 29 CEOs who got paid more than their companies doled out in federal taxes, their compensation was, on average, $32 million;
These companies reported $24 billion in pre-tax profits, but collectively received $238 million in refunds. This works out to an effective tax rate of —1%;
The company that got the biggest refund from Uncle Sam was Citigroup, which is only operating because of taxpayer-funded bailouts. In 2013, Citigroup paid its CEO $18 million while reaping a bounty of $260 million from the IRS;
These 29 companies together operate 237 subsidiary organizations in tax havens. Abbott Laboratories sends the most money on vacation by running 79 subsidiaries. The pharma company paid its CEO $4 million more than its total tax bill in 2013;
CEO compensation is rising fast. At companies which paid their chief exec more than was paid in tax the average paycheck for the top boss nearly doubled from $16.7 million in 2010 to $32 million in 2013.
In an era in which salaries for rank-and-file workers are stagnant, the fact that top-earning companies collect taxpayer money rather than fork it out is deeply disturbing to many. But how do they get away with it?
One way is by exploiting the 2009 Economic Stimulus Act. A “bonus depreciation” provision allows corporations to write off 50% of the cost of buildings and new equipment in the same year that it’s purchased. Earlier this year, Congress voted to make this provision permanent at a cost of $287 billion.
Another method is the Research and Experimentation Tax Credit. This credit allows companies to deduct 14 percent of their R&D spending, which will cost taxpayers an estimated $156 billion over the next ten years.
There’s also the perennial favorite of using offshore havens like the Cayman Islands and Switzerland to shift profits around and reduce tax obligations. The public interest research group Citizens for Tax Justice says that among the Fortune 500 group of companies there are nearly 8,000 tax haven subsidiaries in operation, sluicing $90 billion away from federal coffers each year.
The cash these corporations are saving by avoiding tax payments appears to be finding its way into the pockets of their top management. The result is the increasing income inequality we see in the U.S. Some elected officials — including President Barack Obama — have claimed combating inequality as a priority but whether they have the political will or the political power to do something about the root causes remains to be seen.
