A new analysis by Americans for Tax Fairness (ATF) and the progressive Institute for Policy Studies (IPS) found that between 2018 and 2022, dozens of large U.S. firms paid their top executives more money than they paid in federal taxes.
The research is released at the same time as President Biden has proposed, under the Tax Cuts and Jobs Act, hiking the corporate tax rate to 28% from the 21% rate set in 2017 by his predecessor and likely 2024 contender, former President Trump.
The goal of the IPS and ATF investigation, which examines tax and compensation for the first five years following the implementation of Trump’s tax cuts in 2018, is to make the connection between the lower tax rate and the generous compensation packages that large corporations provide to their top executives.
The investigation found that sixty-four corporations paid their top five CEOs more than the company’s federal tax payments for at least two of those five years.
35 of those businesses, including well-known brands like Ford and Tesla, paid their top executives more during the course of the five years than they did in subsequent tax payments.
Over a five-year period, the top executives at those 35 corporations received compensation totaling $9.5 billion; yet, their aggregate federal income taxes came to a negative $1.8 billion, according to the report.
According to David Kass, executive director of Americans for Tax Fairness, “Both kinds of corporate misbehavior — underpaying taxes and overpaying executives — ultimately make working families the victim through smaller paychecks and diminished public services.”
Taking advantage of numerous tax incentives and loopholes allows many firms to pay tax rates that are lower than those imposed by the Trump tax package. From 16 percent in 2014 to 9 percent in 2018, the average effective tax rate for large, profitable businesses decreased, according per a 2022 Government Accountability Office research.
Biden’s plan, which also included raising taxes on people with net worths above $100 million, is extremely unlikely to be approved by the Republican-controlled House.
The U.S. Chamber of Commerce, a powerful pro-business lobbying organization that spent more than any other interest in Washington, about $70 million on federal lobbying in 2023, sharply criticized the president’s plan.
Although the organization had not seen the report, Neil Bradley, chief policy officer of the nonprofit, told The Hill that “it sounds like something done by people with a political agenda who don’t understand how our tax system works.”
“Companies pay taxes on their profits after their expenses. If a company doesn’t make a profit, or if it reinvests its earnings into building a new plant or paying employees higher wages, then there are no profits after expenses on which to be taxed,” Bradley stated.
“Of course, paying your employees good wages and building new factories are positive things we want employers to do,” he continued.
A lot of the provisions in the 2017 tax reform are scheduled to expire in 2025, thus one of the main issues in the forthcoming presidential election will be how to tax affluent firms and individuals.
