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More for them, less for us • Nevada Current

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In his State of the Union address, President Biden called out “massive executive pay” and vowed to “make big corporations and the very wealthy finally pay their share” of taxes.

Corporate tax dodging and CEO pay have gotten so out of control that many major U.S. companies are paying their top executives more than they’re paying Uncle Sam.

Tesla is perhaps the most dramatic example. Over the period 2018-2022, the electric car maker raked in $4.4 billion in profits but paid no federal income taxes. Meanwhile, Tesla CEO Elon Musk became one of the world’s richest men.

When it comes to fleecing taxpayers while overpaying executives, Tesla is hardly alone. A new report we co-authored for the Institute for Policy Studies and Americans for Tax Fairness analyzes executive pay data for some of the country’s most notorious corporate tax dodgers.

What did we find? In addition to Tesla, 34 other large and profitable U.S. firms — including household names like Ford, Netflix, and T-Mobile — paid less in federal income taxes between 2018 and 2022 than they paid their top five executives.

Another 29 profitable corporations paid their top executives more than they paid Uncle Sam in at least two of the five years of the study period.

One company on our list stands out for the infamous role its executives played in the 2008 financial crisis: American International Group. Back then, the insurance giant ignited a firestorm by pocketing a $180 billion taxpayer bailout and then announcing plans to hand out $165 million in bonuses to the very same executives responsible for pushing the company — and the nation — to the brink of collapse.

Today, AIG is playing the same greedy game of overpaying its top brass and sticking taxpayers with the bill. Between 2018 and 2022, the company paid its top five executives more than it paid in federal income taxes, despite collecting $17.7 billion in U.S. profits. In 2022, CEO Peter Zaffino alone made $75 million.

Lavish executive compensation packages and skimpy corporate tax payments are not unrelated. Executives have a huge personal incentive to hire armies of lobbyists to push for corporate tax cuts because the windfalls from these cuts often wind up in their own pockets.

The 2017 Republican tax law slashed the corporate tax rate from 35 percent to 21 percent and failed to close loopholes that whittle down IRS bills even further. Many large, profitable corporations ended up paying no federal taxes at all.

Corporations took the savings from those tax cuts and spent a record-breaking $1 trillion on stock buybacks, a financial maneuver that artificially inflates the value of executives’ stock-based pay.

Wealthy executives became even wealthier while the nation lost billions of dollars in corporate revenue that could have been used to lower costs and improve services for ordinary people. Until this self-reinforcing cycle is broken, we’ll have a corporate tax and compensation system that works for top executives — and no one else.

What can we do to break this cycle?

Congress can tackle the entwined problems of inadequate corporate tax payments and excess executive pay on several fronts. Raising the corporate tax rate to 28 percent (just halfway back to Obama-era levels) would generate $1.3 trillion in new revenue over the next decade.

Congress must also close loopholes and eliminate wasteful tax breaks, for instance by removing the incentives for American firms to shift profits and production offshore.

Policymakers also have a wealth of tools to curb excessive executive pay, from tax and contracting reforms to stronger regulations to rein in stock buybacks and banker bonuses.

We know we need change when corporations are rewarding a handful of top executives more than they are contributing to the cost of public services needed for our economy to thrive.

This column was distributed by OtherWords.org.


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