Report Reveals U.S. Corporations Dished Out More Money To Top Executives Than Paid In Federal Taxes

The report found that 46 companies paid their top five executives more than the businesses paid in federal taxes during at least two of the five years examined.

A new report shows several big U.S. companies paid their top executives more than they paid in federal taxes between 2018 and 2022.

The bombshell revelation came from an analysis by the Institute for Policy Studies (IPS) and Americans for Tax Fairness (ATF). They aimed to connect the pricey compensation packages big businesses dangle before their top executives to the lower tax rate. They found that 46 companies paid their top five executives more than the businesses paid in federal taxes during at least two of the five identified years.

Out of that number, 35 corporations — including Ford Motors and Tesla — paid their highest-ranking executives more than their next tax payments over all five years. Those executives received payments totaling $9.5 billion over the five-year period, and their combined federal income taxes came in the negative, totaling $1.8 billion.

While President Joe Biden proposes raising the corporate tax rate to 28%, over the 21% rate set by former President Donald Trump in 2017, analysts feel reports like this raise questions about why the economy continues to fail.

“We have these never-ending fights in Congress over our fiscal situation, one crisis after another, and one reason why we’re facing fiscal challenges is because corporations have not been paying their fair share of taxes,” Sarah Anderson, the report’s lead author and IPS’ director of the global economy project, said, according to CBS News.

Fair tax advocates like David Kass, executive director of ATF, shared similar sentiments. He blames corporate behavior for the issue of small paychecks for the working class. “Both kinds of corporate misbehavior — underpaying taxes and overpaying executives — ultimately make working families the victim through smaller paychecks and diminished public services,” Kass said.

However, business advocates have taken a stance against the narrative that companies don’t pay their fair share in taxes and Biden’s plan. Neil Bradley, Chief Policy Officer at the U.S. Chamber of Commerce, which spent nearly $70 million on federal lobbying in 2023, said the study comes off as someone who doesn’t know how the system works. “We haven’t seen the study, but it sounds like something was done by people with a political agenda who don’t understand how our tax system works,” Bradley said.

“Companies pay taxes on their profits after their expenses. If a company doesn’t make a profit, or if it reinvests its earnings into building a new plant or paying employees higher wages, then there are no profits after expenses on which to be taxed.”

Under Trump’s Tax Cuts and Jobs Act, several corporations pay lower tax rates by taking advantage of several tax breaks and loopholes. Large, profitable companies’ average effective tax rate dropped to 9% in 2018 from 16% in 2014. However, in 2022, corporations in the U.S. had an overall effective tax rate of 22.4%. While the rate is higher than other countries, the U.S. still receives a low share of revenue from corporate taxes.

Biden’s plan, which also calls for higher taxes on Americans with a net worth over $100 million, is not likely to be passed by the GOP-controlled House. However, since IPS and ATF’s findings show tax cuts and executive pay are adding to wealth inequality, Anderson says it’s time for corporations to look past what’s legal and look at what’s fair. “It says a lot about the priorities of the companies that a handful of people at the top are getting more than all of the money that profitable corporations are paying to help fund the vital public services and infrastructure that we need for our economy to thrive,” she said.

“Just because something is legal doesn’t make it fair.”