The public assistance that low wages force workers at many major restaurant chains to rely on have gotten attention recently—McDonald's workers, for instance, collect an estimated
$1.2 billion in public assistance—but that's not the only way restaurant chains are passing on labor costs to taxpayers. While wages for workers at the bottom of the pay scale are so low they qualify for benefits like food stamps and Medicaid, pay for top executives is tax-deductible as long as it's "performance pay" like stock options. That allows the restaurants to save
hundreds of millions of dollars in taxes, according to a report from the Institute for Policy Studies:
- During the past two years, the CEOs of the 20 largest [National Restaurant Association] members pocketed more than $662 million in fully deductible “performance pay,” lowering their companies’ IRS bills by an estimated $232 million. That would be enough to cover the cost of food stamps for more than 145,000 households for a year.
- One NRA member —Starbucks— was off the charts. CEO Howard Schultz pocketed $236 million in exercised stock options and other “performance pay” over the 2012-2013 period. That translates into an $82 million taxpayer subsidy—enough to raise the pay for more than 30,000 baristas to $10.10 per hour for a year of full-time work.
- The next four largest beneficiaries of the CEO pay subsidy are fast food corporations. Chipotle, Yum! Brands (owner of Taco Bell, KFC, and Pizza Hut), McDonald’s, and Dunkin’ Brands each raked in CEO pay subsidies ranging from $12 million to $68 million over the period.
- Among full-service restaurants, the company that has enjoyed the largest CEO pay subsidy is Darden, the owner of Olive Garden, Red Lobster, and several other chains. CEO Clarence Otis took in nearly $9 million in fully deductible “performance pay” over the years 2012 and 2013. That works out to a more than $3 million taxpayer subsidy.
Meanwhile, these restaurants and their lobby group, the National Restaurant Association are pushing to keep the minimum wage at a poverty level. McDonald's has even directly told its workers to
apply for food stamps. These profitable companies can afford to pay workers enough to live on without food stamps, and they can afford to pay taxes on their executive pay—or their executives could take a small haircut on the tens of millions of dollars they're paid.
The minimum wage is ridiculously low; unlimited performance pay tax deductibility is straight-up ridiculous. Congress could and should fix both of these things.