Do You Mind Big CEO Paychecks? Because You’re Helping Pay Them

The average American CEO made more than 500 times the average employee in 2011, we recently wrote. And guess what? You helped pay for it.

The federal tax code allows corporations to deduct up to $1 million for executive pay and as much as they want for performance pay and CEO bonuses, nonprofit Public Citizen says. “Partly due to this, bonus pay has become a significant driver of excessive corporate executive pay,” it says.

That seems to be the case for last year’s best-paid Wall Street CEO, Goldman Sachs’ Lloyd Blankfein. He took home a $2 million salary and a nearly $19 million bonus, CNNMoney says.

While that’s not exactly a common size for bonuses, they do add up. Executive compensation tax breaks cost the federal government $30.4 billion in revenue between 2007 and 2010, according to the Economic Policy Institute.

Two U.S. senators are looking to close that expensive loophole. Sens. Jack Reed, D-R.I., and Richard Blumenthal, D-Conn., have introduced the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act.

Separately, a forthcoming Securities and Exchange Commission rule will require public companies to disclose the difference between how much they pay the CEO and the average company employee, The Hill says. Business groups oppose the requirement because, they say, investors don’t care and it could cost time and money to do the math. (But not because it demonstrates gross inequality, right?)

While the Corporate Bonuses Act may or may not pass, the pay ratio rule should definitely happen because it was part of the financial reform package passed in 2010, The Hill says.

“There’s no reason top executives should get a tax subsidy from the rest of us simply because the entire stock market has done well,” former Labor Secretary Robert Reich recently wrote in The Baltimore Sun. “You and I and other taxpayers are also being ripped off.”

How do you feel about this tax break for CEO compensation? Let us know your thoughts on Facebook.

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Comments & discussion

We welcome your opinions, but let’s keep it civil. Like many businesses, we reserve the right to refuse service to anyone. In our case, that means those who communicate by name-calling, racism, using words designed to hurt others or generally acting like an uninformed bully. Also, comments that include links to email addresses or commercial websites typically aren't posted. This isn't a place to advertise your business.

  • BigDog40

    Whatever % bonus the Big Dog gets should be the same % bonus that the Worker Bee’s get. In your case the CEO got a bonus that was around 10 times his salary. That means for a $40,000 salaried employee, the bonus should be $400,000. End of controversy!

  • whitewolf9

    How about if we cut out all those tax free vacations obama and his family take and start making them pay taxes on the fair market value of those trips which probably are approaching a billion dollars at this point. How about these senators have their government salaries eliminated or greatly decreased if they have other income over a certain amount, or better yet, how about taking away the tax deductions for any trips they take back and forth from D.C. to their home state (it should be treated as commuting costs like the rest of us employees, which are not tax deductible). I noticed that senators and congressmen will apparently be getting thousands of dollars subsidies so they won’t have to pay for obamacare. Isn’t that nice; people making an average of $175,00 get tax free money to pay for their health care. And THAT, ladies and gentlemen, are the actions of those who would tell you all about “rich CEOs” and why they are greedy. As Johnny Rotten of the Sex Pistols once said: “ever get the feeling you are being cheated?

    • Kent

      grow up.

      • whitewolf9

        That’s it? That is your bloody response to a serious discussion of tax evasion on a large scale by “elected” officials? It seems that you, like most ‘progressives’ are only interested in principles when it concerns people that you apparently have a philosophical difference. I, for one, am not quite ready to cede authority to those who would be our rulers. I, for one, will never consent to be a serf for the benefit of the new aristocratic ruling class. Remember, the French Revolution was not in response to CEOs; it was in response to the ruling class exploiting the lower classes and creating rules “for thee and not for me”.

        • Barbara

          Why do you single out the Obama family? Presidents and their families have been doing the same thing forever. The Obamas are not being excessive. A lot of the presidential and congressional perks are ridiculous, but don’t singe out Obama.

    • Sue Romeu Healey

      I would love to see them all have to live off the salaries (or should I say lack of salaries) that we all have to as I am currently unemployed from my full time job.

  • Kent

    CEO’s are the biggest leaches on society today. There is absolutely no justification for their hoarding resources the way they do. They are also trying to take over our Democracy with their lobbyists. Corporations are people, yeah right.

  • Reba Gilbert

    $2 million is fine for CEO salary….but bonuses should be divided with all employees….And I am not going to say that the government should require this…US citizens need to wake up…Buy local ,,,,buy American…vote with your wallet.

  • Sue Romeu Healey

    There is no more middle class. Need I say anymore.

    • traderjim7

      Yes, and you can put the blame where it belongs, on the government.

      • Sue Romeu Healey

        I fully agree with you 100%.

  • Tom

    federal subsidies for ceo salaries. and they can’t up the minimum wage. criminals in dc

  • DANNO

    We should start by banning lobbyists. They’re just bagmen bribing the politicians to vote for their corporate cause. These same politicians are the ones empowered to change those laws…what a joke! Not a chance of things changing when they’re getting their pockets filled with cash.

  • whitewolf9

    Barbara, first of all, I did not single out obama (nice try though on the ‘racism’ angle). I believe I mentioned senators (and by necessity, the members of the House of Representatives are also included) in my critique. In fact I specifically gave a situation in which the Congress, averaging over $175,000 in salaries are going to be getting huge subsidies to pay their health care under obamacare. These subsidies are NOT available to the People. I want to know why everyone is so concerned about CEOs high salaries (a high percentage of whom contributed to obama’s reelection campaign by the way) and are not concerned about the high tax free ‘salaries’ (in terms of services received tax free) of the ruling class (and I use that term to denote people who make the rules). God forbid I should try to defend the ‘crony’ capitalists who, as many people correctly believe, do not particularly do anything in the objective sense to justify their windfalls. But I believe in a principle of equality. I cannot support the destruction of one group of leeches but ignore the other groups, chief of whom in my mind are the politicians feeding like pigs off the public trough (by the way, I am curious as to why entertainers, many of whom make enormous amounts of money, never seem to arouse the ire of progressives). In the end, to ignore the principle of equality in the context of salaries etc is to put oneself in the position of choosing one group of gangsters for disfavored treating while ignoring another group of gangsters

  • Alycia

    so who is going to get passed the b*tch status and move toward the ‘let’s do something statge’ we can complain til the end of days but its not going to change anything and this country needs real change. but whats next?

  • Cindy Kadinger

    The only way anything will be changed is if we all break
    the “PC barrier” and start talking about it and I mean really talking
    about it. Americans are becoming complacent with Big Brother providing all for
    us; how many stupid public service announcements do we need to “help”
    us do everyday common sense activities? All at taxpayer expense mind you. This
    is a subconscious way of directing the lives of Americans, not to mention
    injecting subliminal thought that the government is always there to guide and
    “protect” us from our own ineptness.

    The progressives want nothing more than to
    create class warfare in this country; it is much easier to persuade and
    control a class of low-information, entitled, self-righteous, angry, low
    paid voters. Some of you are so enraged with CEO’s making money, providing jobs
    and building the economy that you cannot see your own
    liberal congress-critters cheating and black-balling everyone who
    disagrees with them ( or anyone on the right). I’m not saying
    Conservatives are without their issues, but when the spotlight shines on their
    discrepancies, they are forced out of Dodge City by the rest of the
    Conservatives.

    We all need to check our shortsighted and indignant
    points of view and get to the base of reality to what is really going on
    in our country. Pointing fingers, assigning blame and ducking
    self-responsibility contributes to the feasibility of which the government can
    control us. This has got to stop!

    One last thought; why do you think so many of our city councils, school boards, and local governments
    are democrat-controlled? It is because the Dems have been working behind the
    scenes to position themselves in places of power within the government
    framework for many years. Where are the conservatives? Well, many of us are
    busy with growing our small businesses (that create jobs and produce wealth for
    the economy) or working 2-3 jobs so we don’t depend on food stamps or other government
    programs. Then why do “rich CEO’s” contribute to liberal and progressive causes?……because liberals pass
    restrictive regulations and high taxes on Americans making it impossible for new
    small businesses to succeed, thus eliminating competition. Remember, rich corporations can
    afford lobbyists to petition for exemptions to overbearing regulations.