Sarah Anderson | Zachary Tashman | William Rice
Institute for Policy Studies | Americans for Tax Fairness

Read the full report here.

Introduction

Corporate tax dodging and executive pay packages have both gotten so far out of control that a significant number of major U.S. corporations are paying their top executives more than they’re paying Uncle Sam in federal income taxes. 

The Institute for Policy Studies and Americans for Tax Fairness analyzed executive pay data for some of the country’s most notorious corporate tax dodgers over the period 2018-22 and found 64 of them paid more to their top five executives than they did in federal taxes in at least two out of those five years. For over half (35) of these corporations, their payouts to top corporate brass over that entire span exceeded their net tax payments.

The study’s corporations were drawn from the recent report on corporate tax dodging issued by the Institute on Taxation and Economic Policy. This study builds on years of analysis and advocacy on the issue of corporate tax dodging by ATF and by IPS on excessive executive pay. 

Lavish corporate compensation packages and inadequate corporate tax payments are not unrelated phenomena. Executives are in part reaping rewards for the corporate tax avoidance strategies they pursue, and corporate boards have more money to spend on their highest-paid employees when they don’t have much or anything to pay in taxes. Until this self-reinforcing cycle is broken, we’ll have a corporate tax and governance system that works for top executives — and no one else.

A summary of our findings follows. More detailed findings, including a complete list of the companies we studied, are available in the full version.

Key Findings 

• 35 major U.S. corporations — including famous names like Ford, Netflix and Tesla — paid less in federal income taxes between 2018 and 2022 than they paid their top five executives. All 35 were cumulatively profitable over that five-year span.  
• Among these 35 corporations, the total compensation reported for named executive officers over this five-year period was $9.5 billion. Their combined federal income tax bills came to a negative $1.8 billion — that is, rather than paying taxes, they received refunds.  
• An additional 29 profitable corporations paid their top executives more than they paid in federal income taxes in at least two of the five years of the study period. 
• 18 corporations in the study — despite reporting net profits over the five-year span — paid $0 in federal income taxes. Actually, except in one case, all paid less than zero because they got refunds. These 18 corporations that paid $0 in federal income taxes found the resources to lavish their executives with a cumulative $5.3 billion in pay packages.
• The 64 firms in the study posted cumulative pre-tax domestic profits of $657 billion between 2018 to 2022, yet paid an average effective federal tax rate of just 2.8% (the statutory rate is 21%) while paying their executives over $15 billion. 
• For decades, corporate profits as a share of the economy have been generally rising and CEO pay has been skyrocketing. However, the average effective corporate-tax rate — what firms actually pay as a percentage of their earnings — has been steadily trending downwards.

The Terrible Ten: Case Studies 

Tesla

5-year Executive Pay: $2.5 billion
5-year U.S. Profit: $4.4 billion
5-year Federal Income Tax: -$1 million (0.0%)

Tesla began 2024 as the 8th most valuable corporation in the world with a market cap of nearly $800 billion. It is run by one of the wealthiest men in the world, Elon Musk, who as of the end of 2023 sat on a personal fortune of $251 billion — built in no small part on the value of his Tesla stock. But despite the huge and growing wealth of the corporation and its principal owner, Tesla has never paid a nickel in federal income taxes. 

T-Mobile

5-year Executive Pay: $675 million
5-year U.S. Profit: $17.9 billion
5-year Federal Income Tax: -$80 million (-0.4%)

T-Mobile CEO and President Mike Sievert alone was paid $158 million between 2018 through 2022. Despite raking in nearly $18 billion in profits over those five years, T-Mobile has not only paid no net federal income taxes, it’s actually received a net $80 million in refunds.

T-Mobile has spent millions lobbying Congress to receive special benefits at taxpayers expense, including a special carveout in the 15% corporate minimum tax that allows them to keep their tax deduction for costs they’ve incurred buying up spectrum licenses. This means the federal tax code now is effectively subsidizing T-Mobile’s privatization of public airwaves. 

Netflix

5-year Executive Pay: $652 million
5-year U.S. Profit: $15.1 billion
5-year Federal Income Tax: $236 million (1.6%)

Netflix is the biggest streaming service in the world with over 260 million subscribers. Despite more than $15 billion in profits over the five-year study period, it paid an effective income tax rate likely lower than the vast majority of its customers, just 1.6%. Netflix paid their top executives nearly three times what they paid in federal income tax from 2018 to 2022. 

American International Group

5-year Executive Pay: $406 million
5-year Corporate U.S. Profit: $17.7 billion
5-year Federal Income Tax: $385 million (2.2%)

AIG was at the center of the 2008 financial crisis, which it helped bring about by peddling billions of dollars of poorly understood debt instruments tied to shaky mortgages. After receiving a bailout from the federal government that wound up being worth over $180 billion, AIG announced plans to hand out about $165 million in bonuses to the very same executives responsible for pushing the company — and the nation — to the brink of collapse the preceding year.

Between 2018 and 2022, they netted $17.7 billion in U.S. profits but paid just $385 million in federal, state and local income taxes, less than they paid in compensation for top executives during this period. In 2022, AIG CEO Peter Zaffino received a compensation package worth more than $75 million.

Ford Motor

5-year Executive Pay: $355 million
5-year Corporate U.S. Profit: $7.8 billion
5-year Federal Income Tax: $121 million (1.5%)

Ford loves to tout its “unbreakable connection” with America, but when tax day comes the company always seems to be missing in action. Even though 70% of the company’s assets are located in the U.S. and nearly two-thirds of its revenue is domestic, less than half of their pre-tax income is ascribed to the United States. Partly as a result of these accounting maneuvers, Ford paid a meager 1.5% effective U.S. corporate tax rate for 2018-22, far less than the vast majority of its workers and customers pay. 

Ford paid its executives three times more than it chipped in to Uncle Sam over the five years studied. 

NextEra Energy

5-year Executive Pay: $325 million
5-year Corporate U.S. Profit: $24.0 billion
5-year Federal Income Tax: $287 million (1.2%)

The world’s largest electric utility holding company had some of the highest pre-tax U.S. profits of any company in our sample: $24 billion over the five-year period. Nevertheless, the company paid just $287 million in federal income taxes (a rate of only a little over 1%), significantly less than the $325 million in compensation for their top executives during this period. 

One executive who raked in eight-figure pay packages from the firm in both 2021 and 2022 is Eric Silagy, then the CEO of NextEra subsidiary Florida Power & Light. Silagy abruptly resigned last year amidst growing scrutiny of his role in multiple campaign finance scandals.

Darden Restaurants

5-year Executive Pay: $120 million
5-year Corporate U.S. Profit: $3.6 billion
5-year Federal Income Tax: $28 million (0.8%)

Darden is the world’s largest full-service restaurant corporation: it operates Olive Garden, Capital Grille and seven other chains that collectively employ 190,000 people. The company has been among the restaurants opposing an increase in the federal subminimum wage for restaurant servers and other tipped employees.

While paying workers poverty wages and next to nothing in federal taxes, Darden has rewarded top executives with huge paychecks — even bending its own rules to inflate CEO Eugene Lee’s total compensation to $8.7 million in 2020, 538 times Darden’s median pay that year.

MetLife

5-year Executive Pay: $240 million
5-year Corporate U.S. Profit:: $11.7 billion
5-year Federal Income Tax: $96 million (0.8%)

MetLife, the largest U.S. life insurance corporation, has been enormously profitable in recent years, netting $11.8 billion over the 2018-2022 period. One source of those profits: an obscure U.S. government-backed financing system called Federal Home Loan Banks that is supposed to help increase affordable housing, but which MetLife and other insurers exploited to invest in commercial real estate and corporate bonds.

MetLife has thus been double-dipping in the federal trough by both taking advantage of a taxpayer-backed loan program while avoiding income taxes. Over our study period the firm had an effective corporate income tax rate of just 0.8%. Meanwhile, the company handed out $240 million to top brass and spent $15.1 billion on stock buybacks. 

Duke Energy

5-year Executive Pay: $181 million
5-year Corporate U.S. Profit: $15.6 billion
5-year Federal Income Tax: -$1.2 billion (-7.9%)

Duke Energy CEO Lynn Good and other executives have become extremely wealthy running public monopoly utilities in six states. Good’s total compensation package came to $21.35 million in 2022. She’s also sitting on almost half a million shares of Duke stock, which at a recent stock market close was worth more than $40 million.

The company, one of the nation’s largest contributors to climate change through its coal-fired plants, has a long history of investing in boondoggles and passing the costs on to ratepayers through higher monthly bills. Meanwhile Duke avoided $2.3 billion in federal income taxes over the five years of the study thanks to bonus depreciation.

FirstEnergy

5-year Executive Pay: $121 million
5-year Corporate U.S. Profit: $6.7 billion
5-year Federal Income Tax: –$44 million (-0.7%)

FirstEnergy is at the center of a massive bribery and price-gouging scandal in Ohio, with former President and CEO Charles Jones charged with 10 felonies. FirstEnegy agreed to pay $230 million in penalties to the federal government to avoid further prosecution. 

Part of the agreement forbade the company from writing the penalty off on its taxes as a business deduction — a common practice among corporate scofflaws. Of course, that provision would mean more if the company regularly paid any federal income taxes. Over the last five years, FirstEnergy has actually received a $44 million tax refund, even as it posted multi-billion dollar profits. 

Conclusions & Solutions

Corporate tax dodging deprives us of billions of dollars in corporate revenue that could be used to lower costs and improve services for ordinary people. At the same time, exorbitant executive pay wastes money that could be spent on expanding operations and raising the wages of everyday workers. 

Congress can act to address the entwined problems of inadequate corporate tax payments and excess executive pay. 

On the corporate tax front, Congress should hike the corporate tax rate. Raising the corporate tax rate to 28% (just half way back to Obama-era levels) would generate $1.3 trillion in new revenue over the next decade.

Congress must also close loopholes and eliminate wasteful tax breaks. Sen. Sheldon Whitehouse (D-RI) and Rep. Lloyd Doggett (D-TX) have introduced the No Tax Breaks for Outsourcing Act, which would remove the incentives for American firms to shift profits and production offshore. Congress should also crack down on the use of tax havens.Members of Congress have also introduced a wealth of proposals to curb excessive executive pay, from tax and procurement reforms to stronger regulations to rein in stock buybacks and banker bonuses.