FINANCIAL REFORM

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Thanks a Billion (or So)

A Small Loophole Inserted 20 Years Ago Helps Companies Avoid Paying the U.S. Treasury Big Money

Nov. 11, 2013 - In 2012, the ratio of CEO-to-median worker pay had soared to 354:1. Meanwhile, corporations have avoided paying taxes on their executives’ huge paychecks by paying them primarily on the basis of incentives, sometimes of questionable legitimacy. The top 20 highest-paid CEOs in the most recent version of the AFL-CIO’s annual list of highest-paid CEOs were paid base salaries totaling $28 million, but had performance-based, tax-deductible compensation totaling more than $738 million. Assuming that these CEOs’ companies paid a corporate tax rate of 35 percent, tax-deductible performance-based compensation for these CEOs cost American taxpayers as much as $235 million in lost tax revenue. To address the unintended loophole in section 162(m), Congress should pass the Stop Subsidizing Multi-Million Dollar Corporate Bonuses Act.

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