How much is enough?
By Lloyd Doggett
By Lloyd Doggett
There
is an outrage in our tax code and it's costing you money.
Federal
law currently gives publicly held corporations a special tax deduction when
they pay their executives huge "performance-based" bonuses. The
deduction can be worth millions of dollars. The more they shower their
executives with such pay, the less publicly-held corporations pay in federal
taxes.
And
when giant companies don't pay their fair share, that tax burden is then
shifted onto small businesses and working families.
Public
outcry over huge pay packages and corporate tax dodging has nothing to do with
envy. It's based on an understanding that a top-heavy economy -- where more and
more money goes to the wealthiest 1 percent and less and less to the middle and
bottom -- is not only unfair, it's unstable.
The
staggering gap between extremely well-compensated executives and everyone else
is bad enough -- but our tax code makes the problem worse. Corporations can
deduct from their taxes any amount paid to executives in salaries, bonuses and
stock grants as long as its labeled "performance based." Companies
effectively get a giant tax break for paying their executives outlandishly.
The
"performance" required is rarely Olympic caliber and the bar can be
always be lowered if it proves too high.
When
JPMorgan Chase pays Jamie Dimon $20 million in a year that his bank paid
billions in penalties for wrongdoing, "performance" may have a
different meaning than most small-business owners assume when trying to grow
their companies.
Excessive
pay and other corporate tax avoidance often go hand in hand. In a recent study,
Anthony Petrello of Nabors Industries topped the list of highest-paid
executives, with pay totaling $68.2 million in 2013. Nabors renounced its
American citizenship to avoid taxes in 2002, when it moved its place of
incorporation to Bermuda, while keeping many of its corporate operations in
Houston, Texas.
Walmart
is a good example of how this tax loophole has contributed to out-of-whack
executive pay. Between 2009 and 2014, eight top executives were paid a total of
$334 million, of which nearly $300 million -- or 90 percent -- was supposedly
"performance" pay, according to a report by Americans for Tax
Fairness and the Institute for Policy Studies. The taxpayer subsidy for
Walmart's bonuses: more than $100 million.
Walmart's
not alone. The total cost of subsidizing CEO super salaries at America's
biggest corporations over the next decade is $50 billion, according to the
nonpartisan Joint Committee on Taxation.
That
kind of pricey loophole has a lot of company in the corporate tax code. The
U.S. House of Representatives may soon take up two expired tax breaks that make
it easier for big corporations to ship jobs and hide profits offshore. They
will cost taxpayers $80 billion over 10 years. Such loopholes allowed over 100
of the nation's biggest corporations to pay zero federal income tax in one of
the past five years, a recent Citizens for Tax Justice study found.
This
tax subsidy hurts working Americans in other ways too. The $50 billion cost of
this loophole could pay for a lot of things -- educating our kids, rebuilding
roads and bridges, finding new cures for dread diseases.
Even
in this divided Congress, there has been bipartisan acknowledgement that we
must fix this problem. Chairman Dave Camp, my Republican colleague on the Ways
and Means Committee, included a similar, though more limited, provision in his
draft tax reform plan. When Senator Chuck Grassley was chairman of the Senate
Finance Committee he acknowledged that this area of the tax code is
"broken."
My
legislation to eliminate this loophole would put an end to unlimited tax
write-offs on executive pay. It would make the $1 million tax-deduction cap real.
There is similar legislation in the Senate. Corporations would still be free to
shower their CEO's with huge bonuses if they liked. They just couldn't demand
the rest of us help pay for it.
Rep.
Doggett (D-TX) is a member of the tax-writing House Ways and Means Committee.