The Institute for Policy Studies, which compiled this research in its annual Executive Excess report, highlights four key tax loopholes that either encourage corporations to overpay their executives or lower taxes on what the executives receive. First, the fact that "performance-based" executive pay is tax deductible encourages companies to pay executives a lot:
The unlimited tax deductibility of executive pay loophole operates as a powerful subsidy for excessive compensation. The more corporations pay out in executive compensation, the less they owe in taxes. And average taxpayers wind up paying the bill. According to the Economic Policy Institute, this loophole cost American taxpayers as much as $9.7 billion in 2010.Second, while most of us can only contribute a limited amount to our 401(k) plans each year, corporations can give their executives unlimited tax-protected deferred compensation, and they do: "At least nine CEOs currently have over $50 million stashed away in tax-deferred retirement accounts." IPS puts the cost to taxpayers at $80.6 million a year.
Thanks to Warren Buffett and Mitt Romney, we all know about the carried interest loophole, which costs taxpayers $2.1 billion a year. And reporting the value of executive stock options differently to stockholders and the IRS costs taxpayers $2.5 billion a year.
While these numbers aren't huge in the context of the national budget, these corporate tax loopholes have very real costs. That money could pay for:
Health care for 7,370,673 low-income children for one year ORAnd that's just four very specific loopholes. It doesn't even get to what top executives are not paying thanks to the Bush tax cuts—57 CEOs saved themselves and cost the rest of us a collective $100 million last year—or to a host of other loopholes the report identifies. For instance, coming out of the bank bailout, Citibank got a special waiver on a tax rule; "Accounting experts estimate the long-term value of the waiver at several billion dollars." Abbott Laboratories, which paid its CEO $19 million while getting a $586 million tax refund, "had 64 subsidiaries operating in 16 countries considered tax havens." AT&T got a $420 million refund thanks in large part to accelerated depreciation rules. Energy companies benefit from tax rules established long ago, before they were the consistently profitable monsters they now are. And so on.
Salaries for 211,732 elementary school teachers for one year OR
Head Start slots for 1,892,024 pre-school children for one year OR
VA medical care for 1,843,510 veterans for one year OR
Salaries for 206,826 police or sheriff's patrol officers for one year OR
Pell Grants worth $5,550 each for 2,591,021 college students OR
241,593 clean-energy jobs for one year
Oh, and the 26 corporations that paid the federal government less than they paid their CEOs? Abbott Laboratories, Advanced Micro Devices, AIG, Altera, Anadarko Petroleum, AT&T, Boeing, Broadcom, Chesapeake Energy, Citigroup, Cooper Industries, Danaher, Devon Energy, FirstEnergy, Ford, Halliburton, International Paper, Leucadia National, Marathon Oil, Marsh & McLennan, Motorola Mobility, Motorola Solutions, Newell Rubbermaid, Salesforce.com, Travelers Companies, Tyco International.