View Full Version : U.S. Issues 344 to 1....

08-26-2008, 12:02 PM
Average salaray for a Fortune 500 CEO vs. his employees average pay.

No wonder the gap between rich and poor is the widest now since the depression.

Oh, and way to go CEOs avoiding $20 billion in taxes. That's American Business at its finest!

From Sunday's KC Star:

Average taxpayers subsidize executive pay, report says
The Kansas City Star

Tax and accounting loopholes allow top executives and businesses to avoid paying about $20 billion a year in taxes, according to a report released today.

The Institute for Policy Studies and United for a Fair Economy each year peg an “Executive Excess” report to Labor Day, zeroing in on an aspect of CEO compensation and corporate profits, both of which have grown far faster than average worker pay.

The 15th annual report, “Executive Excess 2008: How Average Taxpayers Subsidize Runaway Pay,” criticizes five tax loopholes that Congress has looked at but not plugged.

The authors note that the compensation of the S&P 500 CEOs in 2007 averaged 344 times the average U.S. worker’s pay. Thirty years ago, the ratio was about 35 to 1.

They attribute the burgeoning gap and tax disparities partly to the declining representation of organized labor in private industry and partly to legal permission slips that encourage huge pay packages for executives.

Barack Obama and John McCain have backed some, but not all, of the executive pay reforms before Congress. The report calls for greater campaign and congressional scrutiny of these five issues:

•Preferential capital gains tax treatment of “carried interest,” a pay practice for private investment fund managers that allows them to count significant income as capital gains instead of professional fees.

On every $1 million earned in “carried interest,” an investment fund manager saves about $200,000 at the lower 15 percent capital gains tax rate; last year, the 50 top-paid private equity and hedge fund managers made an average of $558 million, the report said.

•Unlimited deferred compensation accounts, a perk for CEOs at large companies — unlike ordinary taxpayers, most of whom have a $15,500-a-year maximum they can shield in a tax-deferred 401(k) account.

A study by Equilar, a pay analytics firm, found that U.S. executives’ deferred compensation plan balances increased to a median value of $4.5 million last year.

•Deferred compensation and tax avoidance for executives of businesses registered in offshore tax havens.

“The practice of stashing funds in offshore banks, one Senate investigation has found, costs U.S. taxpayers an estimated $100 billion dollars each year,” the report said.

•Unlimited tax deductibility of executive pay.

“Tax law allows corporations to deduct the cost of executive compensation from their income taxes, as a business expense, so long as this compensation remains ‘reasonable.’ But what’s reasonable? The IRS has no clear definition,” the report said.

•Stock-option accounting double standards — a discrepancy between accounting rules that value stock options on their grant dates and tax code rules that value stock options on the day executives cash them in.

IRS data show that “corporations claimed 2005 stock-option tax deductions that were collectively $61 billion larger than the expenses shown on company books,” the report said, estimating that the double standard accounts for $10 billion out of the $20 billion estimated in lost tax receipts.

The complete report is accessible online at www.ips-dc.org.