Public Employee Press

Corporations get tax deductions for exec pay

By SAM PIZZIGATI
(Press Associates, Inc.)

Every year, thanks to one outrageous loophole in the U.S. tax code, corporations save billions of dollars on what the “Executive Excess 2008” report dubs the “unlimited tax deductibility of executive pay.” Top companies can essentially deduct whatever they pay their executives from their corporate income taxes, so long as they define that pay as a “performance-based incentive.”

The report, by the Institute for Policy Studies and labor-backed United for a Fair Economy group, points out that the more corporations pay their top execs, in effect, the less they pay in taxes.

Direct subsidies for America’s most powerful, “Executive Excess 2008” estimates, add up to $20 billion a year. The report also notes that the federal government spends only $11 billion a year to educate America’s most vulnerable, children with disabilities and other special needs.

Billions more in CEO pay subsidies, the report adds, flow indirectly, through government bailouts and procurement. Federal officials regularly let out contracts to corporations that pay their top executives hundreds of times more than their workers.

One example: Lockheed Martin now gets about 80 percent of its revenue from federal contracts (meaning from taxpayer dollars). Lockheed Martin CEO Robert Stevens made $24 million last year, 787 times the pay of a typical U.S. worker.

Legislation that would end this indirect subsidy for lush CEO compensation is already before Congress. The Patriot Corporations Act would give a preference in federal contract bidding to firms that pay their executives no more than 100 times the pay of their lowest-paid employee.

“Historically, troubled economic times in the United States helped generate long overdue public policy reforms,” sums up “Executive Excess 2008.” “We have now entered troubled economic times.”