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ANALYSIS: Conservative Budget Alternative Saves Average CEO $1.5 Million Every Year

By B. Furnas on March 24, 2009 at 4:00 pm

"ANALYSIS: Conservative Budget Alternative Saves Average CEO $1.5 Million Every Year"

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money_bags.jpgEarlier this month, Rep. Paul Ryan (R-WI), ranking Republican on the House budget committee, published an alternative proposal to the Obama budget in a Wall Street Journal op-ed. The plan: doubling down on Bush-style economics.

Like the Bush tax cuts, Congressman Ryan and his allies in Congress would cut taxes for the wealthiest Americans and reject public investment or a fairer tax code that would ensure broadly shared prosperity.

The Center for American Progress Action Fund finds that Congressman Ryan’s proposals would cut taxes for the average CEO by $1.5 million per year and do nothing at all for a minimum wage worker.

Ryan calls for lowering the 35%, 33% and 28% income tax brackets to 25%, eliminating the capital gains tax, and cutting the top corporate tax rate from 35% to 25%. These hugely regressive tax cuts would extend the Bush economic strategy of massive tax cuts for the wealthy and gutted government revenue.

In 2008, the average CEO of one of America’s largest 800 companies made $3.3 million in salary and bonuses, $6.3 million in stock gains, and $3.2 million in “other compensation” for a total of $12.8 million. Under Ryan’s plan, the average CEO’s $6.5 million in paid income would drop from a marginal tax rate of 35% to 25% and his $6.3 million in stock gains would go from being taxed at 15% to being totally tax free. This tax change would save these CEO’s over $1.5 million every year.

A minimum wage worker, however, making around $15,000/year, would see no benefit at all from these proposed tax changes. They already only pay federal income taxes in the 10% marginal tax bracket, are unlikely to have any capital gains, and would thus see no change under the conservative budget plan.

The Bush tax cuts ushered in almost a decade of tepid economic growth and stagnant wages for American families. Ryan says he and his fellow conservatives are offering to be “part of the solution, not part of the problem.” Why, then, are they only offering more of the same?

Methodology notes after the jump.

Taxable income after deductions and exemptions is approximately 88 percent of adjusted gross income for taxpayers making over $10 million per year, according to IRS data. We assume these CEOs are typical of earners in this income range. We also assume that “other compensation” is taxed as paid income, although if it were taxed as capital gains, these CEO’s would save even more.

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