At least 25 CEOs earned more than their companies paid in income taxes in 2010, according to a new report from the Institute for Policy Studies. Exclusive to The Atlantic, the authors explain their findings and why they matter.
This month, 40,000 Verizon strikers went back to work without a new contract. But their strike hit a nerve. Most Americans cannot understand why Verizon workers should have to spend up to $3,000 more for their family's health care while the company's top five execs have walked off with a quarter-billion dollars in personal pay over the past four years.
If that seems outrageous, just wait. Verizon Inc, got a refund in corporate income taxes in 2010, paid for by U.S. taxpayers. That makes Verizon's CEO Ivan Seidenberg one of at least 25 chief executives in the country who earned more in compensation than their company paid in corporate income taxes in 2010.
Today, the Institute for Policy Studies released a report on CEO pay in America. Our research this year uncovered an astounding fact: Of last year's 100 highest-paid chief execs, 25 took home more in CEO pay than their company paid in 2010 federal income taxes. Here they are:
These 25 CEOs averaged $16.7 million each, well above last year's $10.8 million chief exec pay average at America's top corporations. Most of the companies these 25 CEOs ran actually came out ahead at tax time, collecting tax refunds from the IRS that averaged $304 million.
Here's a clickable graph prepared with our data that compares these CEO's compensation with the small, or negative, tax bills of their companies. All numbers in millions.
Although Verizon paid less in income taxes than its average customer paid in phone bills, the company broke no laws. America's corporations spend hundreds of millions of dollars a year on lobbying, and they get a good return on their investments. They get tax loopholes -- and plenty of them. Last year, Verizon shelled out $16.8 million to lobby federal lawmakers and another $18.7 million on contributions into the campaign accounts of their favorite federal politicians.
What can we do about all this? Maybe the people need some lobbying of our own. We need to press lawmakers to end the loopholes that let our Verizons lavish dollars on their executives -- and their favorite pols -- at the same time they're stiffing Uncle Sam.
We also need to take the incentive out of corporate tax dodging. The financial reform bill Congress enacted last year actually takes a useful step in that direction. This legislation, known as Dodd-Frank, includes a provision that requires major corporations to reveal the ratio between what they pay their top exec and what they pay their "median," or most typical, workers.
Corporate lobbyists let this disclosure mandate slip past them last summer. Now, they're working to have the mandate repealed before federal regulators can put it into effect. What has corporations so worried about this disclosure mandate? If data on the pay gap between executives and workers became available by individual company, lawmakers could start leveraging the power of the public purse. They could, for instance, deny federal tax breaks or government contracts to companies that pay their CEOs over 25 times what they pay their workers.
A generation ago, few corporations paid their top execs much over 25 times what their workers were receiving. The ratio between CEO pay and average worker pay last year: 325.
Methodology: The data in this report is based on the "Current U.S. taxes paid" reported in the tax footnote of corporate Form 10-Ks, filed annually with the Securities and Exchange Commission. All are available electronically at www.sec.gov. We exclude "deferred taxes" because these are amounts that may or may not be paid at some future date, but for which no payment is made in the current year. Among the "deferred taxes" are taxes theoretically owed on money sheltered in offshore tax havens. So long as those funds are kept offshore, tax payments can be deferred indefinitely. breakdown of revenue, assets, employees, and reported domestic net profit for clues to companies' profit-shifting behavior. Executive compensation figures come from the Associated Press. Includes: salary, bonuses, perks, any interest on deferred pay that's above market interest rates, and the value a company places on stock and stock options awarded during the year. See here.
Editor's note: Snooping around the Internet, you might find these companies reporting different tax numbers. Verizon, for example, reported 14% effective tax rate in 2010. This figure includes deferred taxes that may be paid years down the road, IPS tax analyst Scott Klinger explained. IPS looked only at taxes paid to the IRS in the year 2010 alone.><