A new report from the Institute for Policy Studies notes that tax breaks enjoyed by 26 of the most highly-compensated chief executive officers in the U.S. could have instead been spent to hire an estimated 211,000 elementary school teachers.
According to the report, four direct tax subsidies that corporations take advantage of to boost executive pay into the stratosphere cost taxpayers an estimated $14.4 billion per year, which is enough to hire 211,000 elementary school teachers, fund public broadcasting for more than 30 years, or provide the maximum Pell Grant to more than 2.5 million college students.
The US tax code is riddled with easily exploitable loopholes that corporations routinely employ when it comes to executive pay. A CEO’s salary is only tax deductible up to $1 million, so instead they receive other forms of compensation, like stock options or other “performance based pay,” which are exempt from the deductibility limit. That practice alone cost taxpayers $9.7 billion in 2011, says IPS:
The unlimited tax deductibility of executive pay loophole operates as a powerful subsidy for excessive compensation. The more corporations pay out in executive compensation, the less they owe in taxes. And average taxpayers wind up paying the bill. According to the Economic Policy Institute, this loophole cost American taxpayers as much as $9.7 billion in 2010.
Rewarding executives with salaries stretching into the hundreds of millions per year, and pushing the bill onto taxpayers, simply forces deeper cuts in other government services, at a time when CEO pay is already through the roof.