What are CEOs being rewarded for? The report argues that top executives are rewarded for their ability (and willingness) to aggressively avoid taxes, benefitting company profits and shareholders, if not employees as a whole. Aside from their own paychecks, the profits made by tax avoidance are funneled into lobbying and campaign donations; two strategies to ensure that corporate taxes are low and regulation light.
Who’s to Blame?
While it’s easy to point fingers at corporations for their tax avoidance behavior, it’s important to remember that it’s not just CEOs who are being rewarded for dodging the intent, if not the letter, of the law. Politicians must be willing to leave open the loopholes that allow corporations to dodge taxes.
Companies like Citigroup and Bank of America run 427 and 115 subsidiaries in tax havens respectively. These practices are all perfectly legal, thanks to the unwillingness of the House and Senate to impose stricter regulations. It’s a safe bet that campaign donations and sweet-talking lobbyists go a long way toward fueling political complacency in corporate treatment by the government. Corporate executives may be motivated by greed and self interest, but many politicians don’t lag far behind.
Legislation passed in September 2007 aims to create more transparency on the lobbyists’ influence in Washington. The Honest Leadership and Open Government Act (HLOGA) placed new restrictions on lobbyist's activities, as well as requiring quarterly disclosure reports on the part of organizations and the lobbyists they employ. The fine for failing to correct a defective disclosure report within 60 days of notification? Up to, and not exceeding, $200,000. Barely a slap on the wrist for corporations averaging global profits of $1.9 billion.
The Dodd-Frank Financial Reform Law, signed by President Obama in July of 2010, requires companies to disclose CEO salaries and median employee salaries (calculated excluding the CEO). The law also requires companies to express the relationship between financial performance and CEO salary, putting high-paid CEOs in the hot seat if companies perform poorly.
Article comments
1 - Glenn Contrarian
But don't forget - we've got a terribly, terribly high corporate tax rate, as the Republicans keep trying to remind us that it's the second-highest in the developed world.
And while it is true that we DO have the second-highest NOMINAL corporate tax rate in the developed world, after all the tax breaks and subsidies are taken into account, we've got the second-LOWEST effective tax rate in the developed world.
And what do the BC conservatives do whenever I point this out? They stay silent or the change the subject, just as they do when I point out that American taxpayers have a lower overall tax burden than they've had for fifty years, lower than under Eisenhower, Nixon, Reagan, Bush, or Bush.
They're okay with the rank hypocrisy and the utter falseness of conservative leaders when it comes to taxes, just so long as they can get rid of the Marxist/socialist/Nazi Kenyan-born black guy in the White House. They dare not demand fact and honor (as opposed to hypocrisy) from their elected conservative leaders...because if they did, they'd start becoming liberal...
...which is why I was once a Republican and am now a proud liberal
2 - Glenn Contrarian
And here's a cartoon that applies.
3 - Dr Joseph S Maresca
An inescapable flat tax could be helpful. The alternative minimum tax sought to establish a taxation floor. Currently, the government is attempting to encourage more hiring through targeted reduced taxes. Tightening of some classic tax havens could be beneficial.