Make a jillion dollars and pay no taxes
By Sarah Anderson, William Rice, Zachary Tashman | March 13, 2024
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.
Sarah Anderson, William Rice, Zachary Tashman
Sarah Anderson directs the Global Economy
Project and co-edits Inequality.org at the Institute for Policy Studies.
William Rice is a senior writer and Zachary Tashman is a Senior Research and
Policy Associate at Americans for Tax Fairness. This op-ed was distributed by
OtherWords.org.