If you’re fascinated by the mechanics of the tax avoidance game as played by our large corporations, you’ll love Executive Excess 2011, the Institute for Policy Studies’ 18th annual report on executive compensation.
Take, for example, the practice of “transfer pricing.” According to IPS researchers, tech and drug companies in particular save on taxes by opening shell companies in tax havens and making the shells the repositories of their intellectual property rights. They then have to “buy” the privilege of using those rights, paying the shells inflated prices which are then deducted from the parent companies’ tax bills. Meanwhile the shell companies are taxed at low rates, if at all, for the money they rake in as “owners” of the intellectual property rights.
According to the IPS, it’s gambits like this—not primarily charitable donations or green programs—that cut corporate tax bills down so far that many of our largest firms pay no tax at all. Meanwhile, 25 of last year’s highest-paid corporate executives took in more in compensation than their companies paid in federal taxes, the researchers found.
And there’s not only the issue of the taxes paid by the company as a company; there’s the matter of the CEOs’ individual income tax. If you’re a worker trying to finance your retirement with a 401(k), you’re limited as to the amount you can contribute to that tax-deferred instrument (the current cap on employee contributions is $16,500; that excludes employer contributions). But if you’re a CEO, your company has likely set up a tax-deferred account for you, and there is no limit to the amount of money that can be put into that account.
(Four years ago, the researchers point out, a provision that would have limited payins to such accounts to $1 million a year came before Congress, but a conference committee threw it out.)
And here’s a real sign of the long-term drift in the way corporations use money to influence politics: 20 of the companies that paid their chief executive officer more than they paid in federal taxes also spent more on lobbying than they paid in federal taxes. Put that together with the fact that in 1945, 35 percent of federal revenues came from corporate taxes, while this year 9 percent will come from corporate taxes.
The logic is simple: why pay taxes when you can get more bang for your buck by buying politicians?
See the report at www.ips-dc.org/resources/executive_excess_2011.pdf
