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Between the upcoming presidential election and fiscal cliff, tax issues are stepping into the spotlight more than ever. A new study by the Institute for Policy Studies, a left-leaning think tank in the nation’s capital, focuses the attention on companies that paid more to their chief executive officers last year than they did in federal taxes.
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According to the organization’s report, 26 CEOs out of the top 100-highest paid U.S. corporate chief executives took home more pay than their companies paid in federal income taxes in 2011. The CEOs of these firms received an average total compensation of $20.4 million, a 23 percent increase over the average seen in the prior year. The 26 companies typically had more than $1 billion in U.S. pre-tax income, but received an average tax refund of $163 million.
Listed below are the 26 companies that made The Institute for Policy Studies’ radar:
Abbott Laboratories (NYSE:ABT)
Advanced Micro Devices (NYSE:AMD)
Anadarko Petroleum (NYSE:APC)
Chesapeake Energy (NYSE:CHK)
Cooper Industries (NYSE:CBE)
Devon Energy (NYSE:DVN)
Ford Motor (NYSE:F)
International Paper (NYSE:IP)
Leucadia National (NYSE:LUK)
Marathon Oil (NYSE:MRO)
Marsh & McLennan (NYSE:MMC)
Motorola Mobility (NASDAQ:GOOG)
Newell Rubbermaid (NYSE:NWL)
Travelers Companies (NYSE:TRV)
Tyco International (NYSE:TYC)
The Institute places a large part of the blame on large tax loopholes that encourage excess pay, and tax breaks for companies that add little social value. Loopholes encouraging high pay include: unlimited tax deductibility of executive pay, unlimited deferred compensation, preferential treatment of carried interest and stock option accounting double standard. “The four most direct tax subsidies for excessive executive pay cost taxpayers an estimated $14.4 billion per year—$46 for every American man, woman, and child. That amount could also cover the annual cost of hiring 211,732 elementary-school teachers or creating 241,593 clean-energy jobs,” the report states. It also names Apple (NASDAQ:AAPL) as the top beneficiary of the accounting double standard in 2010. “This tech giant deducted $743 million and received $260 million in tax subsidy. Apple established a new CEO pay record in 2011 with $374 million for new CEO Timothy D. Cook,” the Institute claims.
When it comes to tax breaks for companies, The Institute takes issue with tax havens, research and experimentation tax credit, accelerated depreciation provisions of the 2009 economic stimulus plan and energy development tax subsidies. The report explains, “Of the 26 firms we found that paid their CEO more than they paid in federal income taxes, 19 operate subsidiaries in tax havens. These countries, such as the Cayman Islands or the Isle of Man, operate as secrecy jurisdictions where corporations can shift around profits, avoid accountability, and reduce tax obligations. The 26 firms on our list, all combined, operated 537 tax-haven subsidiaries last year.”
Naturally, the report has drawn a fair amount of controversy. Scott Stoffel, a spokesperson for Abbott, said, “This is a blatant misrepresentation of the facts.” He explained that the report’s numbers reflect a non-cash accounting adjustment due to the resolution of various tax matters, according to Reuters. While taxes will remain a hot button issue going forward, the report at least draws attention to the complexity of the U.S. tax code and the need to simplify it. I would not hold my breathe though, Congress has an all-time approval rating low for a reason.
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