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Companies paid more to CEOs than in U.S. tax, study finds

By Bernard Condon

AP Business Writer

LAST UPDATED: 02:25 a.m. HST, Aug 16, 2012

NEW YORK >> Twenty-six big U.S. companies paid their CEOs more last year than they paid the federal government in tax, according to a study released Thursday by a liberal-leaning think tank.

The study, by the Institute for Policy Studies, said the companies, including AT&T, Boeing and Citigroup, paid their CEOs an average of $20.4 million last year while paying little or no federal tax on ample profits, according to regulatory filings.

On average, the 26 companies generated net income of more than $1 billion in the U.S., the study said.

The study blasted tax rules allowing unlimited deductions for CEO "performance-based" pay, like many stock options. It said the five biggest performance payers among the 26 companies took $232 million of these deductions last year.

Among the "kingpins" it criticized was CEO James McNerney Jr. of Boeing. It said he got $18.4 million in pay last year while his company received a tax refund of $605 million.

The study also laid into Citigroup for paying CEO Vikram Pandit $14.9 million while the bank received a net $144 million in tax benefits.

Eighteen of the 26 companies received cash back or credits to apply against tax in the future, according to the report.

The study, a 45-page attack on the corporate tax code, said deductions and credits are allowing companies to lavish big pay packages on executives so they can cut their tax bills while Washington gets less money in a time of trillion-plus deficits.

"Our nation's tax code has become a powerful enabler of bloated CEO pay," the study said.

To calculate tax, the study used companies' own math based on accounting rules. Regulators require companies to estimate their tax bill and disclose it in public documents for investors.

The tax filings the companies make to the government, typically in September, are private and can differ from the estimate.

Another problem is that the study doesn't count tax the company plans to pay but has deferred to future years. The authors argue that deferred tax can be put off indefinitely.

Charles Bickers, a Boeing spokesman, said that the company's federal tax bill, including deferred tax, was $1.3 billion last year, not a net credit, as the think tank's study found.

Boeing did lower its tax, in part by using a popular tax credit encouraging companies to spend more on research and development. Bickers said that helped the company hire 11,000 people in the U.S. last year.

"Boeing supports a simpler, more competitive tax code. At the same time, we have put the R&D tax credit to exactly the use it was designed — creating U.S. jobs in a high-value, advanced technology industry," he said in a statement.

The Institute for Policy Studies said Boeing would have spent the money on R&D without the credit.

In addition to performance-pay deductions and R&D credits, the report criticized the use of tax havens that allow technology companies, for instance, to assign intellectual-property rights to shell companies in the Cayman Islands, so they can run profits through them and avoid taxes. It noted that 26 companies have a combined 537 subsidiaries in tax-haven countries.

The study also cited accelerated depreciation on investments, which allow a company to take deductions for big-ticket purchases in one year, as opposed to over several years. That cuts taxes in the first year.

The study said AT&T used accelerated depreciation to save $5.2 billion on its 2011 taxes while paying CEO Randall Stephenson $18.7 million last year.

Sarah Lubman, an AT&T spokeswoman, said the deductions encouraged the company to make $20 billion in investments last year. She also said that the deductions won't be available to take in future years, which should increase taxes.

A Citigroup spokeswoman noted that the company lost money in 2008 and 2009 and used the losses to offset taxes on profits this year.

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SteveToo wrote:
Don't blame the companys for following the law. Blame Congress for passing the laws.
on August 15,2012 | 09:26PM
IAmSane wrote:
Corporations pay/buy the Congress to have the Congress pass such laws.
on August 15,2012 | 10:00PM
star08 wrote:
Um, have you considered that the companies just might have something to do with the laws passing?!
on August 15,2012 | 10:02PM
nodaddynotthebelt wrote:
I'd like to know what companies took advantage of this tax loophole. AT&T is mentioned. So is Boeing. So SA, could you update the information to include such? Thank you.
on August 15,2012 | 11:43PM
nodaddynotthebelt wrote:
I'd also like to know what congressmen authored this law.
on August 15,2012 | 11:46PM
nodaddynotthebelt wrote:
I'd also appreciate information on what congressmen were involved in the authoring of this tax loophole.
on August 15,2012 | 11:46PM
whs1966 wrote:
Has any of the money "saved" by the George W.-era tax cuts trickled down to you lately? Even Ronald Reagan gave up on"trickle down economics," aka voodoo economics or Reagonomics.
on August 16,2012 | 04:35AM
koolau wrote:
Let's see.....pay big dollars to CEOs who run companies, create profit, maintain and provide jobs, etc., or pay big taxes for the government to spend foolishly and invest in companies like Solyndra, Freddie Mac, and Fannie Mae that have gone bankrupt. Case in point, Alan Mulhaly was paid millions, but saved Ford from going bankrupt and people from losing jobs. Result, more people working and paying taxes instead of going on unemloyment, food stamps, etc. You choose whch way the money should go.
on August 16,2012 | 05:01AM
bender wrote:
We can have it bothways, They can pay their CEOs as much as they want, just pay taxes too, instead of lobbying Congress for loopholes. How does it make you feel when you pay your taxes that you know Boeing and others are getting refunds in the hundreds of millions.
on August 16,2012 | 05:36AM
localguy wrote:
Let's see.....pay big dollars to CEOs who run banks and companies, fail to follow federal laws, companies get fined hundreds of millions by the fed. Later same companies decide to increase share prices by firing thousands of workers who have families and mortgages. Later company is doing very bad, hard to stay in business, babooze CEO given Golden Parachute in the millions while workers have already exhausted their unemployment. Company hires new babooze CEO for mega millions, starting the same process over and over and over like a Mobius Loop. This is what many of them do, fail everyone yet get way over paid. What is wrong with this picture?
on August 16,2012 | 06:39AM
fstop wrote:
"NEW YORK >> Twenty-six big U.S. companies paid their CEOs more last year than they paid the federal government in tax, according to a study released Thursday by a liberal-leaning think tank."

And guess what? Those very same CEOs presumably paid income tax on their salaries--at a rate much higher than the corporate tax rate.

on August 16,2012 | 07:13AM
honopic wrote:
How do you know they what the CEO's paid in income tax? Do you have access to their returns? Isn't there a slight chance that they would have spent some of those millions on high-priced tax attorneys and accountants to "ease their tax burden?" Oh, wait. I see you're from New York. You probably have inside information that those of us out here in the middle of the Pacific don't have.
on August 16,2012 | 09:42AM
cojef wrote:
Occupies are picketing the wrong places. They should park in front of the corporate headquarters and full their signs and yell all they can. Then they would be doing some good and may be jerk the conscious of these corporate looters. They take exorbitant salaries and loot from the shareholders. Just check the dividend records of these companies. Wonder what GM paid their executives? After the bailout they recieved, they should receive any bonuses.
on August 16,2012 | 09:51AM
cojef wrote:
Guess. My post did not pass muster. Just used bailout funds and corporate bonuses. Wow, censors are like the "Gestapo"?
on August 16,2012 | 09:54AM
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