Posts
(Please consider making even a small contribution to the Welcome to Pottersville2 Quarterly Fundraiser happening now ($5.00 is suggested for those on a tight budget) or at least sending a link to your friends if you think the subjects discussed here are worth publicizing. Thank you for your support. We are in a real tight spot financially right now and would sincerely appreciate any type of contribution. Anything you can do will make a huge difference in this blog's ability to survive in these difficult economic times.)
Tragedy strikes again: Phyllis Diller Dies at 85
FBI Investigates Republican Congressmen’s Drunken, Naked Escapades In Israel
Another Republican Ass Bites the Dust? RAPE! (Legitimate Rape, That Is)
On Poverty: What Bush Tax Cuts, Two Wars and An Unfettered Wall Street Have Given The Rest of Us
Monday, August 20, 2012
Abby Zimet
Charts of the Day: Telling visuals on record high income disparity and number of Americans - 66 million and counting - at or below 125% of the federal poverty level. Shameful.
The New Robber Barons: How Taxpayers Subsidize CEOs’ Multimillion Salaries
A new report finds many top executives are taking home more than their corporations pay in taxes – at our expense
Lanai, a tiny resort island in Hawaii, has 18 miles of secluded beaches, no traffic lights and a population of just over 3,000. This summer, Larry Ellison, the CEO of Oracle, a California-based software company, bought 98% of the island for a sum reported to exceed $500m.
The Institute for Policy Studies, a Washington DC thinktank, says that a chunk of the money Ellison spent buying Lanai should have paid for elementary school teachers and clean energy jobs, instead of fulfilling the billionaire CEO’s vacation fantasies.
That’s one conclusion of their new report, “The CEO Hands in Uncle Sam’s Pocket: How Our Tax Dollars Subsidize Exorbitant Executive Pay”, which points out that Oracle took advantage of a 1993 loophole in tax law to designate $76m of Ellison’s income as “performance-related pay”, which allowed him to avoid paying any taxes on the money.
Dozens of US CEOs have cashed in on this major tax incentive at an estimated cost to US taxpayers of $9.7bn last year. Statistics provided by National Priorities Project suggest that the same amount of money could have paid for 142,625 elementary school teachers, or healthcare for 4.96 million low-income children.
“At a time of austerity, it’s beyond absurd that billions of our tax dollars are pouring into executive pockets,” says Sarah Anderson, a report co-author.
In 1980, the average US CEO was paid 42 times as much as the average worker when tax rates for the richest stood at 70%. Today, that ratio has widened to 380 times – exacerbated in part, no doubt, by the fact that CEOs are able to dramatically reduce their tax burdens by a reduction in top tax rates, as well as several new loopholes introduced in recent years.
In fact, some companies paid their CEOs more money than they paid in taxes. Take Aubrey McClendon, CEO of Oklahoma-based Chesapeake Energy, who was paid $17.9m in 2011, while his company gave Uncle Sam just $13m on sales of $11.64bn.
Chesapeake achieved this startlingly low tax liability by claiming a “drilling-costs tax benefit” that allows generous income tax deferrals in case an oil well comes up dry. Yet, this decades-old tax incentive to encourage oil companies to prospect far and wide is now largely irrelevant since sophisticated technologies allow them to accurately gauge where to drill.
“McClendon’s primary goal is not to solve America’s energy problems, but to build a pipeline directly from your wallet into his,” writes Jeff Goodell of Rolling Stone this past March, describing the CEO as “a rightwing billionaire who profits more from flipping land than drilling for gas”.
McClendon is not alone. The Institute for Policy Studies found that 26 of the 100 highest-paid US CEOs took home more in pay than their companies paid in federal income taxes. On average, each of these company bosses was paid $20.4m last year.
Another scam that CEOs pull on the taxpayer is called “deferred compensation”.
The way that works is simple – most taxpayers are expected to pay 35% of their income in taxes the year they earn it. But a CEO does not have to pay the tax until they claim the cash which can be earning interest in the mean time. Depending on how the money is invested, CEOs can engineer a substantial profit.
This allowed Michael Duke, CEO of Walmart, to sock away $17,028,615 tax free in 2011, roughly 774 times more than one of his employees would have been allowed to do under normal tax rules.
Yet the money these CEOs makes shrinks into insignificance compared to the money that hedge fund managers make. Take Raymond Dalio, who was paid an astronomical $3bn in 2011. This titan of Wall Street had to pay just 15% in taxes because the money was considered “capital gains”, as opposed to the average citizen who would be required to pay 25% (in income tax). Cost to the taxpayer in 2011: $450m.
“Some tax breaks do have a redeeming social value. Most don’t,” write report authors Sarah Anderson, Chuck Collins, Scott Klinger and Sam Pizzigati.
“In fact, most create incentives for things companies would have done anyway or reward corporate behaviors that deserve no encouragement from taxpayers, especially at a time of fiscal crisis.”
The report proves the case made by thousands of protesters who took to the streets last September as part of the Occupy movement, and that of investors who stormed annual meetings this year as part of the “Shareholder Spring” to reclaim enterprises from many overpaid CEOs.
The authors of the new report have an even better solution: make these executives pay their fair share of taxes, just like the rest of us.
No comments:
Post a Comment