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You're subsidizing CEOs' massive pay

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

By MSN Money Partner Apr 25, 2014 1:15PM

This post comes from Krystal Steinmetz at partner site Money Talks News. 

Money Talks News on MSN MoneyIf 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.

CEO © Roy McMahon, CorbisIt'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?

More from Money Talks News


Apr 28, 2014 3:57AM
It is all about corporate greed.  It has always been about corporate greed.
Apr 28, 2014 9:48AM

That isn't all we subsidize.

How about all those ridiculous government jobs Irs, judges, union supported jobs like police and fire.

I could go on an on u know the ones, YOU and me pay and pay and go without while these guys scam the system and get rich pig rich.

This country is out of control

Apr 28, 2014 11:06AM
Just more ways that the politicians use the tax code to maintain their captured voting blocks.  That is why the progressive income tax and current tax code needs to be eliminated and a citizenship fee implemented that is equal for everyone.  No more loopholes, no more exemptions, no more credits, no more deductions, etc. ... a simple fee that pays for the benefits of being a US citizen. 
The worst one was Obama gave GE a tax refund of like $5 billion when they had made over $8 billion last year. Yep the corruption is running hard and strong. The USA will collapse soon because of all of this corruption.
Jun 10, 2014 6:24PM
just shows who is in charge of th "government"
May 2, 2014 7:46PM

another idiotic story.. yes a business deducts its expenses from its income and then pays taxes on what is left...... this is not news...

Apr 28, 2014 1:58PM
Another bad article.   Most all corporate expenses including wages and benefits are tax deductible to the corporation.   A company taxing a legal tax deduction for the costs of its CEO does not = a subsidy any more than taking the same deduction for the wages of everyone else at that company.  Say what you will about CEOs making too much money, but they will have to pay their taxes on that money sooner or later.  And maybe just maybe if there were a lot more qualified people able to run big corporations, there would be more competition for these jobs, but there isn't.   Too many of us are able to flip burgers, not enough of us with Masters degrees in Business.   Getting an advanced education and working hard  may lead you to a higher tax bracket.  Complaining that your boss makes too much, is probably why you don't make more.   Stop bitching and get to work or school.  Maybe the writers at MSN Money should actually know a little bit about basic accounting and tax law before they are allowed to write articles on a website that is about money.
Apr 28, 2014 10:00AM

Someone needs to tell the left-wingers at NBC that the government NOT taking money from the private sector is not a 'government subsidy'.

A subsidy is actual cash payments of taxpayer money by the government to a certain group or organization such as Obama's largess to so-called 'green energy companies' which get both special tax breaks and direct cash payments.

And, as usual, NBC's 'source' (the Institute for Policy Studies) is a George Soros-funded Marxist organization.

Apr 28, 2014 12:46PM

Taxes on wages (in any form – flat or progressive) are the greatest evil of our American Republic. When government is free to steal from you, there are no limits to waste and abuse in government. If a person chooses to work extra hours or two jobs in order to better provide for themselves or their family, they should not be penalized, but that is what happens. The more you make by working harder and longer, the more money is stolen from you, and given to those who spend their lives living off the hard work of others.

The revenue the government needs to provide legitimate constitutional services should be obtained primarily from a national sales tax instead of a tax on wages. All would pay based on consumption, the more you spend the more you pay. The more luxury you surround yourself with, the more you pay. Your choice. A national sales tax system would capture money spent by criminals and by illegal aliens who currently pay near zero in taxes. There would need to be some exemptions: Cars (already have a federal excise tax) Primary Residence/Rental Properties (vacation homes would be subject to tax/rental profit would be taxed) Fresh Food (Preprocessed foods and prepared meals would be taxed – only fresh/fresh frozen/canned goods would be exempt) Insurance Premiums, Health Care & Certified Education.

Adding another layer of tax to a business would not be fair. Businesses would need to be compensated by keeping a portion of the tax to cover the expense of collection and reporting. A percentage of .20 to .05 would be fair.

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