The recently released study by Institute for Policy Studies that identified 25 Fortune 500 companies who’s CEOs were paid more last year than they paid in federal income tax naturally piqued our interest, and created a buzz in the media as well. David Kocieniewski at the NY Times and others addressed this issue, which dovetails in somewhat with his prior stories on GE not paying taxes despite billions in profits and our Ferraro 500.
While it is an interesting phenomenon that some executives are paid more than their company’s U.S. tax expense, we hardly found that surprising. However, the study and the “solutions” it proposed focused on the executive compensation as the cause of the meager tax payments, and to us that seems like their view of the forest is obscured by the trees. While policy makers and Congress can debate the merits of letting companies deduct Chief Executive level compensation and perks, the fact is that even if the law was changed to completely eliminate those deductions, these companies would still not be paying a reasonable amount of taxes. They are all taking proper, and in some cases improper, tax breaks and aggressive positions that absolutely dwarf the executive compensation deductions. For example, International Paper cumulatively claimed $2.1 billion in bogus tax credits for black liquor in 2009 & 2010 compared to Mr. John Faraci’s $19.3 million cumulative salary for those years. Mr. Faraci earned less than one cent for every dollar of tax credit claimed for black liquor. The IRS, Congress, and the public need to focus their attention where the real money is in tax avoidance, such as abusive use of tax credits, transfer pricing, and other aggressive tax planning schemes.
Recent Comments