March 16th 2024.
A recent report has revealed that several major corporations in the U.S. have been paying their top executives more than they pay in federal taxes. The startling findings were uncovered by the Institute for Policy Studies and Americans for Tax Fairness, who sought to draw a connection between exorbitant executive compensation and lower tax rates. The report found that out of 46 companies, 35 of them, including big names like Ford Motors and Tesla, paid their top five executives more than what they paid in federal taxes over a span of five years. In total, these executives received $9.5 billion in compensation while their combined federal income taxes amounted to a negative $1.8 billion.
This news comes at a time when President Joe Biden is proposing to raise the corporate tax rate from the 21% set by former President Donald Trump in 2017, to 28%. Analysts are raising questions about why the economy continues to struggle despite corporations not paying their fair share in taxes. Sarah Anderson, lead author of the report and director of the global economy project at IPS, believes that the fiscal challenges faced by the country are in part due to corporations not paying their fair share. She said, "We have these never-ending fights in Congress over our fiscal situation, one crisis after another, and one reason why we're facing fiscal challenges is because corporations have not been paying their fair share of taxes."
Advocates for fair tax policies, such as David Kass, executive director of Americans for Tax Fairness, share a similar perspective. Kass blames corporate behavior for the issue of low wages for working class families, stating, "Both kinds of corporate misbehavior - underpaying taxes and overpaying executives - ultimately make working families the victim through smaller paychecks and diminished public services."
However, not everyone agrees with this narrative. Neil Bradley, Chief Policy Officer at the U.S. Chamber of Commerce, which spent nearly $70 million on federal lobbying in 2023, sees the report as politically motivated and lacking understanding of the tax system. He said, "We haven't seen the study, but it sounds like something was done by people with a political agenda who don't understand how our tax system works."
Under Trump's Tax Cuts and Jobs Act, many corporations were able to lower their tax rates through tax breaks and loopholes. In 2018, the average effective tax rate for large, profitable companies dropped to 9% from 16% in 2014. However, in 2022, the overall effective tax rate for corporations in the U.S. was 22.4%. While this is higher than other countries, the U.S. still receives a small share of revenue from corporate taxes.
Biden's proposed plan, which also includes higher taxes for those with a net worth over $100 million, is facing opposition from the GOP-controlled House. But as IPS and ATF's report highlights the impact of tax cuts and executive pay on wealth inequality, Anderson believes it's time for corporations to consider what is fair, not just what is legal. She stated, "It says a lot about the priorities of the companies that a handful of people at the top are getting more than all of the money that profitable corporations are paying to help fund the vital public services and infrastructure that we need for our economy to thrive."
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