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Are Your Tax Dollars Paying for Excessive CEO Salaries?

Groups charge tax code loopholes subsidize corporate heads

August 25, 2008
Think it's none of your business what a corporate CEO earns? A study by two advocacy groups makes a case that when corporations pay their top executives millions a year, its taxpayers who end up subsidizing part of their paychecks.

The study, by the Institute for Policy Studies and United for a Fair Economy, calculates the annual cost to taxpayers at $20 billion per year, because of the following tax and accounting loopholes that they say encourage excessive executive pay:

• Preferential capital gains treatment of carried interest ($2.6 billion)

• Unlimited deferred pay ($80.6 million)

• Offshore deferred compensation ($2.1 billion)

• Unlimited deductibility of executive compensation ($5.2 billion)

• Stock option accounting double standard ($10.0 billion)

"These loopholes allow top executives to avoid paying their fair share of taxes. As a result, ordinary taxpayers wind up picking up the bill," said report co-author and IPS Associate Fellow Sam Pizzigati.

Pizzigati says members of Congress have attempted to plug each of these five loopholes, but their efforts have stalled in the face of strong opposition from corporate lobby groups.

The presidential race is shining a brighter spotlight on the issue, as both candidates have attacked excessive executive compensation on the campaign trail. And yet the report points out that neither Barack Obama nor John McCain has yet endorsed all the major reforms needed to eliminate subsidies for executive pay.

"It's outrageous that our tax dollars are inflating executive paychecks," says Institute for Policy Studies fellow Sarah Anderson, a lead author of the annual Executive Excess reports for the past 15 years. "Surely in these troubled economic times we can find better ways to spend our nation's wealth."

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