Perhaps the most illuminating blog post I’ve read this week was this one. It’s by In These Times’ David Moberg and it concerns the “disgrace to the human race” (as Jimmy Carter described it) that is the U.S. federal tax code. Moberg writes about a research report called Executive Excess*, released by the Institute for Policy Studies, which analyzes the ways in which U.S. tax laws actively encourage massive tax dodging by corporations and grotesquely overcompensated CEOs. To name just one of many outrages the report documents: as Moberg writes, “26 out of the 100 highest paid CEOs received more in overall pay than their companies paid in federal income taxes (and many of those corporations actually received tax refunds).”
According to the report, the four “most direct” subsidies for out-of-control CEO paychecks cost U.S. taxpayers a total of about $14.4 billion per year. Those subsidies are as follows:
— Declaring that its pay to the CEO is for that CEO’s “performance.” This enables the corporation to write off its taxes on any amount of the CEO’s compensation, not just the standard limit of $1 million.
— Unlimited deferred compensation, whereby pensions, stock options and the like do not get taxed like regular income, no matter how much filthy lucre the CEO receives in this form — Mitt Romney’s $21+ million IRA, anyone?
— Double standards on accounting for stock options. Stock options are tax deductible, yet are not required to be reported on SEC financial statements, a lack of transparency that presents a wildly misleading picture to investors and employees.
— “[P]referential treatment for ‘carried interest’ in hedge, private equity and other investment funds (where payments that should be taxed like regular income are instead taxed at a much lower rate).”
A number of reforms aimed at closing the loopholes and capping CEO pay have been proposed or are in the works. Moberg concludes:
But perhaps the most effective constraints on CEO excess is the simplest in terms of policy, if not politics: Go back to the Eisenhower-era top marginal tax rates of 91 percent.
I say, amen to that!
*Note: I tried to download a PDF of the report from IPS’ website because I wanted to summarize it myself, but the link was dead. Therefore, I am relying on Moberg’s summary.
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