The new robber barons: how taxpayers subsidise CEOs' multimillion salaries

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Limousines arrive at Bilderberg 2011
In 1980, CEO pay was 42 times an average worker's wage; today, that multiplier is 380. Photograph: Charlie Skelton






In fact, some companies paid their CEOs more money than they paid in taxes. Take Aubrey McClendon, CEO of Oklahoma-based Chesapeake Energy, who was paid $17.9m in 2011, while his company gave Uncle Sam just $13m on sales of $11.64bn.

Chesapeake achieved this startlingly low tax liability by claiming a "drilling-costs tax benefit" that allows generous income tax deferrals in case an oil well comes up dry. Yet, this decades-old tax incentive to encourage oil companies to prospect far and wide is now largely irrelevant since sophisticated technologies allow them to accurately gauge where to drill.

"McClendon's primary goal is not to solve America's energy problems, but to build a pipeline directly from your wallet into his," writes Jeff Goodell of Rolling Stone this past March, describing the CEO as "a rightwing billionaire who profits more from flipping land than drilling for gas".

McClendon is not alone. The Institute for Policy Studies found that 26 of the 100 highest-paid US CEOs took home more in pay than their companies paid in federal income taxes. On average, each of these company bosses was paid $20.4m last year.

Another scam that CEOs pull on the taxpayer is called "deferred compensation". The way that works is simple – most taxpayers are expected to pay 35% of their income in taxes the year they earn it. But a CEO does not have to pay the tax until they claim the cash which can be earning interest in the mean time. Depending on how the money is invested, CEOs can engineer a substantial profit.

This allowed Michael Duke, CEO of Walmart, to sock away $17,028,615 tax free in 2011, roughly 774 times more than one of his employees would have been allowed to do under normal tax rules.

Yet the money these CEOs makes shrinks into insignificance compared to the money that hedge fund managers make. Take Raymond Dalio, who was paid an astronomical $3bn in 2011. This titan of Wall Street had to pay just 15% in taxes because the money was considered "capital gains", as opposed to the average citizen who would be required to pay 25% (in income tax). Cost to the taxpayer in 2011: $450m.

"Some tax breaks do have a redeeming social value. Most don't," write report authors Sarah Anderson, Chuck Collins, Scott Klinger and Sam Pizzigati.

"In fact, most create incentives for things companies would have done anyway or reward corporate behaviors that deserve no encouragement from taxpayers, especially at a time of fiscal crisis."

The report proves the case made by thousands of protesters who took to the streets last September as part of the Occupy movement, and that of investors who stormed annual meetings this year as part of the "Shareholder Spring" to reclaim enterprises from many overpaid CEOs.

The authors of the new report have an even better solution: make these executives pay their fair share of taxes, just like the rest of us.

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