Those firms not only paid less to the federal government than their top bosses between 2018-22— they paid less than nothing to Uncle Sam, instead receiving almost $2 billion in cumulative refunds.

Dozens of big profitable corporations paid their top executives more in compensation than they paid in federal income taxes over a recent five-year stretch, according to a new report from Americans for Tax Fairness (ATF) and the Institute for Policy Studies (IPS) released on March 13. 

The ATF-IPS report reveals 35 firms that paid less in federal income taxes than they paid in compensation to their top five executives between 2018-22 – the first five years under the Trump-GOP tax law that substantially cut corporate taxes. The report also offers several key measures policymakers can take to hold big corporations accountable by  ensuring they don’t underpay taxes while overpaying their top brass. 

Washington’s ongoing fiscal crisis threatens public services that working families rely on, and huge corporations that don’t pay their fair share of taxes are a big part of the problem. These corporations use some of the savings from tax dodging to reward their top brass with exorbitant pay packages, further exacerbating the nation’s destabilizing income and wealth gaps.

The paired scandals of corporations overpaying their executives while underpaying their taxes was highlighted last week in President Biden’s State of the Union address. He demanded the American people no longer be forced to subsidize huge paydays for company bosses by disallowing tax deductions on all salaries over $1 million. 

Among the report’s key revelations:

• 35 profitable corporations paid top executives more than they paid in federal income taxes between 2018 and 2022. 
  • Electric-car maker Tesla paid founder Elon Musk and the other four highest-paid executives $2.5 billion over that period, but despite $4.4 billion in domestic profits paid nothing in cumulative federal income taxes and instead got back a net $1 million in tax refunds.
  • Wireless giant T-Mobile paid its top five executives $675 million, racked up almost $18 billion in domestic profits, yet instead of paying net taxes pocketed a cumulative refund of $80 million.
  • Streaming king Netflix paid next to nothing on over $15 billion in domestic profits, only paying $236 million (or 1.6%) in taxes while rewarding their top five occupants of the executive suite with over $650 million in compensation.
• The 35 companies not only paid less to the federal government than their top bosses—they paid less than nothing to Uncle Sam, instead receiving almost $2 billion in cumulative refunds. 
• 29 other big firms handed out bigger paychecks in the executive suite than they mailed in federal tax checks in at least two of the five years studied.
• The reasons Corporate America can get away with paying so little in taxes and so much to the top brass.
• Solutions to the intertwined problems of overpaid corporate execs and underpaid corporate taxes.

“Both kinds of corporate misbehavior—underpaying taxes and overpaying executives—ultimately make working families the victim through smaller paychecks and diminished public services,” said David Kass, executive director of Americans for Tax Fairness.

“This report shows how executives of big corporations are rewarded for aggressive tax avoidance while working families and small businesses are left to pick up the tab,” said IPS Global Economy director and report co-author Sarah Anderson. 

The report highlights the fact that corporate taxes as a share of federal revenue and of the American economy have both been declining for decades. The 2017 Trump-GOP tax law — the centerpiece of which was a 40% corporate tax cut — only made things worse. The report also notes that while there have been attempts in recent years to rein in excessive executive compensation, the pay packages keep getting bigger.

The report offers several key policy solutions to end rampant corporate tax dodging and rein in excessive executive pay: 

• 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.
• Closing loopholes and eliminating tax breaks, through measures such as the No Tax Breaks for Outsourcing Act, which would remove the incentives for American firms to shift profits and production offshore.
• Enacting tax and procurement reforms and stronger curbs on stock buybacks and banker bonuses, which would help return executive pay to more reasonable levels.

“Rather than more tax breaks, Congress should focus on addressing these deficiencies by cracking down on the use of tax havens, eliminating wasteful corporate subsidies and closing loopholes that further enrich wealthy corporate executives,” the report concludes. 

Link to the full analysis and a breakdown of key findings: https://americansfortaxfairness.org/less-us-corporations-pay-executives-uncle-sam/