CEOs are paid more than taxes paid by some large corporations, essentially meaning Joe Taxpayer is in part making a large donation to the corporate excess so decried in recent months as income inequality skyrockets in America.
The fact that CEOs are often paid more than taxes paid by the companies they helm in and of itself isn’t the issue, but a new study out of progressive think tank the Institute for Policy Studies highlights an “uneven playing field” created when large corporations enjoy tax loopholes and a lower carried interest rate allowing for hefty CEO compensation while not offsetting their own costs to the government in the way of a proportional contribution in taxes.
The report’s co-author is Sarah Anderson, the Institute for Policy Studies’ global economy project director. Anderson commented to ABC on the report’s findings that CEOs are paid more than taxes paid:
“The report is timely at a time when the tax debate is so intense in this country… Some leaders are saying we need to reduce the corporate tax burden even more while major companies are taking advantage of loopholes to lower their tax bill.”
One of the loopholes that enables CEOs to receive pay higher than taxes paid is paying an executive in stock options rather than salary. Taxing such “speculative compensation” at a lower rate is fair, says William McBride, chief economist at the conservative-leaning nonpartisan think tank the Tax Foundation:
“They’re worth nothing unless they’re in the money,” McBride told ABC News. “It wouldn’t be fair to tax someone for getting paid an option that doesn’t have any real value until it has been exercised.”
While CEOs being paid more than taxes in and of itself is not the problem, Anderson says that taxpayers would have a fairer shake if the loopholes that enable CEOs to be subsidized off middle-class workers could be closed. The report’s author suggests capping deductions to ensure everyone is pulling their weight when it comes to the tax burden:
“However, we need to keep chipping away at the myth that massive payouts are necessary to attract talented managers… Having a meaningful deductibility cap would send the right message, and at least taxpayers wouldn’t have to continue to subsidize excessive pay.”
Per the report, 26 corporations paid their CEOs more than taxes paid in recent years.