Aug. 31 (Bloomberg) -- Twenty-five of the best-paid chief executive officers in the U.S. earned more in salary and other compensation in 2010 than their companies’ federal income tax expenses as disclosed in public filings, according to a report by the Institute for Policy Studies.
The Washington-based nonprofit group’s report, released today, examined 100 publicly traded U.S. corporations with the highest-paid CEOs. It found that companies whose CEOs’ compensation exceeded reported tax expense in 2010 had average global profits of $1.9 billion.
Companies in this group, according to the report, included Cablevision Systems Corp., EBay Inc., Verizon Communications Inc. and Boeing Co. In fact, some companies that rewarded their CEOs with seven-figure compensation were getting money back from the government.
According to the report, Cablevision CEO James Dolan earned $13.2 million in 2010 while the Bethpage, New York-based company had a $3 million corporate income tax benefit. Verizon CEO Ivan Seidenberg earned $18.1 million while the New York-based company had a $705 million tax benefit.
EBay CEO John J. Donahoe was paid $12.4 million and the San Jose, California-based company collected a $131 million tax benefit.
Tax Expense, Payments
The tax expense reported in annual financial statements can differ from actual tax payments, which are confidential, for a variety of reasons.
The institute said its findings underscore the need for an overhaul of the U.S. tax code that would reduce the number of tax strategies available to companies, especially their ability to lower tax payments by parking profits overseas.
“Tax reform has to close up some of these loopholes and the offshore system,” Chuck Collins, one of the report’s authors, said in an interview. “We might be able to lower the overall corporate rate by broadening the base.”
Eighteen of the 25 companies mentioned in the report operated subsidiaries in countries known as offshore tax havens, Collins said.
Legislation proposed by Senator Carl Levin, a Michigan Democrat, would eliminate many of the tax-avoidance practices used by companies in the study, Collins said.
“Businesses and CEOs shouldn’t be rewarded for so aggressively avoiding their responsibility to pay taxes,” he said.
Representative Elijah Cummings of Maryland, the top Democrat on the House Committee on Oversight and Government Reform, in a letter dated yesterday asked panel chairman Darrell Issa, a California Republican, to hold a hearing on CEO compensation.
In the letter, Cummings urged the panel to “examine in detail why CEO pay and corporate profits are skyrocketing while worker pay stagnates and unemployment remains unacceptably high, as well as the extent to which our tax code may be encouraging these growing disparities.”
The institute’s list includes Dow Chemical Co., which has its headquarters in Midland, Michigan, in a district represented in Congress by Representative Dave Camp, the chairman of the tax-writing Ways and Means Committee.
Dow reported paying its CEO Andrew Liveris $17.7 million and collecting a tax benefit of $576 million in 2010, according to the study.
Dow spokeswoman Rebecca Bentley said in a statement that the report is “misleading.” She said Dow was not taxed on its U.S. operations in 2010 because the company was not profitable in the U.S. in that year.
“While we take significant issue with the selective nature of his analysis, we agree with the author’s assertion that significant, thoughtful changes to the U.S. tax code are overdue,” Bentley said in the statement.
Camp wants to lower the overall corporate tax rate from 35 to 25 percent. He has said that would require reducing or eliminating tax breaks used by companies to lower their tax obligations.
Camp has not said which breaks he would curb to achieve a lower overall rate.
Twenty of the 25 companies on the institute’s list reported spending more on lobbying Congress than they did on federal tax payments, the organization said.
Data for the report was taken from annual securities filings and other public filings. The institute’s website says it works to promote a society based on “justice, nonviolence, sustainability and decency.”
The report echoes some elements of a study released in May by Citizens for Tax Justice, a Washington-based nonprofit group backed by labor unions, which said 11 U.S. corporations reported $62 billion in domestic profits while paying a negative 3.6 percent tax rate in 2010.
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