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CEOs Bring in Large Paychecks While Their Companies Pile up Unpaid Tax Bills

September 16th

Both the Wall Street Journal and the New York Times recently reported that of the 100 most highly paid American CEOs, 25 earned more than their company contributed in taxes. These articles proposed that these corporations were using tax deductions and other loopholes as a means of avoiding paying taxes, while still funding exorbitant pay checks for top executives.

These conclusions were based on a report released by the Institute for Policy Studies. However, current analyses of this document have noticed that it may not actually prove the accusations it makes.

Massive CEO Rewards…Maybe Not

While the study conducted by the Institute for Policy Studies does demonstrate that Corporate CEOs often make inordinate sums of money, it also demonstrates that numerous corporations have significant amount of unpaid taxes. However, what the study does not succeed in doing is to demonstrate a causal relationship. In fact, at no point does the study “The Massive CEO Rewards for Tax Dodging” ever prove conclusively that there is a relationship between corporations underpaying their taxes and their paying CEOs larger salaries.

According to Reuters, the study used a skewed system of statistical analysis in order to prove their point. Instead of comparing groups of CEOs within the top 100, they compared 25 of those top 100 to CEOs from the S&P 500. This method essentially guarantees that their study will show that the CEOs in the first group are paid more. However, this would be the case for any CEOs from the top 100, regardless of their company’s tax behavior.

In addition, of the 25 companies that were the focus of the study, only five pay any taxes at all, which means that all of their employees actually earn more than the company contributes in tax. This is, supposedly, all an effect of the method employed by the Institute for Policy Studies for calculating the corporate effective tax rate. In essence, their results had nothing to do with corporate tax fraud or exuberantly high CEO pay rates.

 

 
 
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