Uncle Sam Needs Some Better Nephews

Average Americans have a choice at tax time. They can pay their taxes or risk going to jail for tax evasion.

America’s corporate CEOs have a different set of tax-time choices. These CEOs can have the corporations they run pay Uncle Sam or they can have their corporations pay more to their CEOs.

Guess which way lots of CEOs are leaning. Better yet, read “Fleecing Uncle Sam,” the just-released report from the Institute for Policy Studies and Center for Effective Government that tallies up the choices top CEOs are actually making.

This new “Fleecing Uncle Sam” study looks at the 100 U.S. corporations that last year shelled out the most in CEO pay. Of these 100 companies, 29 paid Uncle Sam less in taxes than they paid their CEO in compensation.

How could that happen? Did these firms simply have bad years in 2013 and end up with not much income to tax? Not exactly. In fact, not at all. These 29 companies last year together grabbed a robust $24 billion in U.S. pre-tax profits.

And the CEOs at these 29 companies — major outfits like Boeing, General Motors, and Verizon — pulled in handsome paychecks for those billions in profits. The CEOs averaged, note “Fleecing Uncle Sam” co-authors Sarah Anderson and Scott Klinger, an impressive $32 million each.

Top-tier American corporations, in other words, are stiffing Uncle Sam at the same time they’re piling up profits and extravagantly rewarding their top execs.

These corporations have no magical super powers that make taxes disappear. They do have friends in high places — the U.S. Congress, for one.

Over recent decades, as “Fleecing Uncle Sam” relates, lawmakers have lavished upon Corporate America “lucrative loopholes and tax credits that have taxpayers picking up the normal costs of business that corporations used to pay for themselves,” tens of billions in annual subsidies “for everything from company research and development expenses to normal equipment purchases.”

Average American taxpayers are even picking up the tab for all those tens of millions that corporations lay on their CEOs as compensation. The current federal tax code essentially lets corporations deduct off their taxes whatever windfalls cascade into America’s executive suites.

Average taxpayers are picking up another tab, too: the bill for all the public services — from highways to clean water — that benefit everyone and every institution in our society, corporations included. With corporations shirking their fair share at tax time, the nation’s basic tax burden falls on average Americans.

Just how much tax shirking are corporations doing? The new “Fleecing Uncle Sam” report offers one suggestive clue. If the seven largest U.S. firms that pay Uncle Sam less than they pay their CEOs had paid taxes last year on their profits at the standard 35 percent U.S. corporate tax rate, the study calculates, these seven companies would have owed $25.9 billion in federal taxes.

In real-life 2013, these seven corporations, taken together as a group, didn’t pay any federal corporate income tax. Instead, notes “Fleecing Uncle Sam”, the seven gobbled up $1.9 billion in tax refunds. The difference between what they could have paid in taxes and what they claimed in refunds: $27.8 billion.

What could America do with $27.8 billion? That sum would be enough to make free pre-K education a reality for every four-year-old in the entire United States.

The billions that could be helping four-year-olds are helping CEOs instead — to ever higher rewards. Between 2003 and 2012, recent research shows, America’s top 500 corporations spent 54 percent of their lightly taxed profits “buying back” shares of their stock off the open market, a maneuver that serves to boost a company’s share price — and the CEO rewards tied to that share price.

Now CEOs do, of course, have to pay personal tax on the corporate pay they receive. And they do now face, thanks to the 2013 expiration of the Bush tax cuts on income over $250,000, somewhat higher personal income tax rates on their rising incomes. The top-bracket U.S. tax rate now stands at 39.6 percent, up a bit over the 35 percent top rate of the George W. Bush years.

But CEOs don’t have to sweat that higher rate right now, thanks to still another convenient tax loophole that “Fleecing Uncle Sam” co-author Scott Klinger examines in another study released earlier this month.

Average Americans, Klinger explains in this paper, can currently defer from their annual taxes no more than $18,000 in 401(k) contributions.

CEOs, by contrast, can defer from taxes an unlimited amount of their executive compensation every year, via special corporate retirement plans that have enabled America’s chief executives to build up huge retirement stashes. The CEOs of Starbucks, Honeywell, McKesson, and Walmart each held earlier this year over $140 million in total retirement assets.

Former Walmart CEO Mike Duke last year parked $19 million in his own special deferred pay account and, with that parking deferral, saved almost $7 million off his personal 2013 federal income tax bill.

Walmart workers, Scott Klinger adds, haven’t been “nearly so lucky.” In October, Walmart announced plans to raise health insurance premium costs for 1.2 million employees and end health insurance entirely for 30,000 part-time employees.

Various pieces of legislation designed to end the corporate tax loopholes that let America’s CEOs stiff Uncle Sam — and get fabulously rich in the process — are now pending in Congress. “Fleecing Uncle Sam” has the particulars on all these legislative initiatives.

But the “corporate tax reform” leaders in Congress are now pushing incorporates none of these bills. Average taxpayers are going to have to push back.

Sam Pizzigati edits Too Much, the Institute for Policy Studies online weekly on excess and inequality. His latest book: “The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class” (Seven Stories Press).

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