Report: You’re Subsidizing CEOs’ Massive Pay

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A tax loophole allows corporations to deduct millions when they give CEOs huge stock options and other types of "performance pay."

If you shake your head when hearing about multimillion-dollar pay packages for executives, you’re probably not going to be happy to hear that you as a taxpayer have helped subsidize that huge CEO pay.

It’s true. A new report by the left-leaning Institute for Policy Studies found that a tax loophole has allowed corporations “to deduct unlimited amounts from their income taxes for the cost of executive compensation — as long as the pay is in the form of stock options and other so-called ‘performance pay,’” the institute said.

In other words, the more a company pays its top executive in performance pay, the less the company has to pay in taxes.

This loophole has provided a massive subsidy for exorbitant executive compensation.

The report focuses specifically on the restaurant industry, and for good reason. The industry has proven to be a double burden for taxpayers. While restaurant workers are often paid so little that they are forced to rely on taxpayer-funded programs for the low-income, taxpayers are also unknowingly helping to subsidize millions in executive compensation.

At the same time, the National Restaurant Association is lobbying to block minimum wage increases.

According to CBS MoneyWatch:

The chief executives of the NRA’s 20 largest members take home more than $662 million in fully deductible “performance pay” over the past two years, which reduced their corporate tax bills by $232 million, the study found. Meanwhile, many low-paid workers at restaurants run by NRA members — such as McDonald’s and Chipotle — rely on government programs for services they can’t afford on their earnings.

A number of restaurant corporations are using tax subsidies to boost executive pay, CNN Money said. Here are a few of the heavy hitters.

  • Starbucks. The company gave CEO Howard Schultz a total of $236 million in performance pay for 2012 and 2013. “That translates into an $82 million taxpayer subsidy — enough to raise the pay for more than 30,000 baristas to $10.10 per hour for a year of full-time work,” the institute said.
  • McDonald’s. The fast-food chain dished out $34 million in CEO stock options in 2012 and 2013, which generated a taxpayer subsidy of $12 million.
  • Chipotle. Handing out nearly $200 million in performance pay to its CEO in 2012-2013 led to a $69 million tax break.
  • Yum! Brands (owner of Taco Bell, KFC and Pizza Hut). The company received a $23 million tax break after handing out $67 million in performance pay in the past couple of years.

How do you feel about subsidizing executives’ excessive performance pay? Share your thoughts below or on our Facebook page.

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