20 Tax Dodgers: $240 Million for CEOs, Big Loss for the American People

by Scott Klinger, 8/17/2014

Highlights:
  • 20 firms paid no federal income taxes in the second quarter of this year despite reporting $4.4 billion in profits.

  • Collectively, these 20 CEOs were paid $240 million in 2013 by the corporations they lead, an average of $12 million per CEO.

  • These 20 companies saved as much as $84 million on their annual tax bills last year simply because they paid their CEOs so much.

USA Today published a story last week entitled “20 big profitable companies paid no taxes.” Using data provided by S&P Capital IQ, the newspaper identified 20 firms that paid no federal taxes in the second quarter of this year despite reporting $4.4 billion in second quarter profits. Collectively, these 20 CEOs were paid $240 million by the corporations they lead, an average of $12 million per CEO.

Because CEO pay is in most cases fully tax deductible as a normal business expense on corporate tax returns, these 20 companies saved as much as $84 million on their annual tax bills last year simply because they paid their CEOs so much. Sens. Jack Reed (D-RI) and Richard Blumenthal (D-CT ) have introduced the Stop Subsidizing Multi-Million Dollar Corporate Bonuses Act (S. 1476), which would cap CEO pay deductions at $1 million per executive and raise more $50 billion in additional revenue over the next decade. Had this bill been law last year, these 20 tax-dodging firms would have received $77 million less in public subsidies for their CEO pay.

Half of the companies identified by USA Today are Real Estate Investment Trust (REITs), a designation that allows these corporations to escape federal corporate income taxes so long as their shareholders report their share of corporate profit on their individual income tax returns. USA Today notes that this attractive tax deal is “one reason this corporate structure is getting more popular.” 

Historically, REITs have been limited to portfolios containing properties like office buildings, shopping centers, hotels, and private prisons, but new rulings by the U.S. Treasury last May greatly expanded this tax loophole. The rulings allow telecommunications company assets – like cell towers and phone networks – to be considered REITs, and some analysts think solar energy farms will be quick to follow.

Two of the firms on USA Today’s list, Eaton Corporation and Seagate Technologies, are firms that abandoned their U.S. registrations for new corporate papers in offshore tax havens. This practice, known as corporate inversion, became front-page news after drug retailer Walgreens announced it was considering such a move. Walgreens abandoned its plans after a powerful consumer backlash and a courageous public rebuke from Sen. Dick Durbin (D-IL), who represents the company's home state of Illinois.

When corporations pay one person more than they pay our federal government for the myriad of taxpayer-funded services that their businesses depend on, it is a sign of just how broken both the tax system and the system of executive compensation are. No profitable corporation should get all the services the federal government provides for free. We should start by closing the loophole that generates huge tax breaks for those that lavishly fill their executives’ pockets.  

Company Net Income
2Q 2014
(in millions)
2013 CEO Pay
Merck $2,004 $13,375,935
Seagate Technology* $320 $19,758,406
Thermo Fisher $279 $16,168,880
General Motors $278 $9.071,309
Public Storage# $277 $9,199,200
Iron Mountain# $272 $9,766,616
Newmont Mining $180 $8,763,222
Eaton* $171 $23,097,458
Avalonbay# $158 $11,393,742
Kimco Realty# $90 $3,136,145
Prologis $81 $15,190,029
Boston Properties# $79 $23,821,829
Apartment Investment# $77 $5,021,130
Plum Creek Timber# $55 $8,161,257
Citrix Systems $53 $11,508,033
Crown Castle# $35 $7,389,109
Macerich# $16 $13,125,048
News Corp. $13 $26,100,000
Essex Property Trust# $6 $2,166,625
First Solar $5 $3,690,272
     
TOTAL $4,449 $239,904,245

* = Inverted corporation – abandoned U.S. registration for one in foreign tax haven
# = Real Estate Investment Trust (REIT)

Sources: Profit data: “20 big, profitable companies paid no taxes” USA Today. The author corrected one typo in the article, Crown Castle’s net income. CEO pay data: with the exception of News Corp., all pay data come from most recent proxy statement filed by the company with the U.S. Securities and Exchange Commission as of Aug 13, 2014. News Corp. did not file a proxy statement with the SEC; its pay data for comes from Forbes.com.

back to Blog

very true james, sadly

WHY?

I wouldn't look for any closing of these loopholes any time soon. The corporations who exploit the loopholes own the people who created them. What we have here is a corporatocracy ruled by corporations and corporation-collaborating government officials. And there are enough corporation-created institutions and culture to keep the hoi polloi pacified. Our antennae may go up when we read articles like this, but nobody is really going to do anything about it. We just wring our hands and vote the offending vermin back into office.

great article, cfe rocks

Post new comment

By submitting this form, you accept the Mollom privacy policy.

Comments Policy

The Center for Effective Government requests that all site users maintain a reasonable standard of decorum in their comments. We reserve the right to remove comments that contain threats and excessive profanity. Comments that contain any form of commercial advertising may be edited or marked as spam at our discretion.

Thank you for your assistance in fostering a constructive, respectful dialogue on our site.