Wealthy Corporations Are Paying Their CEOs More Than They Pay in Taxes

Tesla, Ford, Netflix and T-Mobile are among scores of profitable U.S. firms that pay their top executives more than they pay in federal taxes. It’s a system that rewards the super rich and punishes the rest of us.

Sarah Anderson, William Rice and Zachary Tashman

Elon Musk is very happy about the current tax structure—it's making him incredibly rich. (GETTY IMAGES)

In his State of the Union address, President Biden called out massive executive pay” and vowed to make big corporations and the very wealthy finally pay their share” of taxes.

Corporate tax dodging and CEO pay have gotten so out of control that many major U.S. companies are paying their top executives more than they’re paying the American government.

Tesla is perhaps the most dramatic example. Over the period from 2018 to 2022, the electric car maker raked in $4.4 billion in profits but paid no federal income taxes. Meanwhile, Tesla CEO Elon Musk, already among the incredibly wealthy, saw his fortune skyrocket and became one of the world’s richest men with an estimated net worth of more than $190 billion.

When it comes to fleecing taxpayers while overpaying executives, Tesla is hardly alone. A new report we co-authored for the Institute for Policy Studies and Americans for Tax Fairness analyzes executive pay data for some of the country’s most notorious corporate tax dodgers.

What did we find? In addition to Tesla, 34 other large and profitable U.S. firms — including household names like Ford, Netflix and T-Mobile — paid less in federal income taxes between 2018 and 2022 than they paid their top five executives.

Another 29 profitable corporations paid their top executives more than they paid in taxes in at least two of the five years of the study period.

One company on our list stands out for the infamous role its executives played in the 2008 financial crisis: American International Group (AIG). Back then, the insurance giant ignited a firestorm by pocketing a more than $180 billion taxpayer bailout and then announcing plans to hand out $165 million in bonuses to the very same executives responsible for pushing the company — and the nation — to the brink of collapse.

Today, AIG is playing the same greedy game of overpaying its top brass and sticking taxpayers with the bill. Between 2018 and 2022, the company paid its top five executives more than it paid in federal income taxes, despite collecting $17.7 billion in profits. In 2022, CEO Peter Zaffino alone made more than $75 million.

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Lavish executive compensation packages and skimpy corporate tax payments are not unrelated. Executives have a huge personal incentive to hire armies of lobbyists to push for corporate tax cuts because the windfalls from these cuts often wind up in their own pockets.

The 2017 Republican tax law slashed the corporate tax rate from 35% to 21% and failed to close loopholes that whittle down IRS bills even further. As a result, many large, profitable corporations ended up paying no federal taxes at all.

Over the following year, corporations took the savings from those tax cuts and spent a record-breaking $1 trillion on stock buybacks, a financial maneuver that artificially inflates the value of executives’ stock-based pay.

Wealthy executives became even wealthier while the nation lost billions of dollars in corporate revenue that could have been used to lower costs and improve services for ordinary people (not to mention healthcare, housing and other vital areas). Until this self-reinforcing cycle is broken, we’ll have a corporate tax and compensation system that works for top executives — and no one else.

What can we do to break this cycle?

Congress can tackle the entwined problems of inadequate corporate tax payments and excess executive pay on several fronts. Raising the corporate tax rate to 28% (just halfway back to Obama-era levels) would generate $1.3 trillion in new revenue over the next decade.

Congress can also close loopholes and eliminate wasteful tax breaks, for instance by removing the incentives for American firms to shift profits and production offshore. Both of these proposals have been pushed by the White House.

Policymakers also have a wealth of tools to curb excessive executive pay, from tax and contracting reforms to stronger regulations to rein in stock buybacks and banker bonuses.

Under our current system corporations are rewarding a handful of top executives more than they are contributing to the cost of public services needed for our economy to thrive. That needs to change, now. 

This op-ed was distributed by Oth​er​Words​.org.

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Sarah Anderson directs the Global Economy Project and co-edits Inequal​i​ty​.org at the Institute for Policy Studies. 

William Rice is a senior writer at Americans for Tax Fairness.

Zachary Tashman is a Senior Research and Policy Associate at Americans for Tax Fairness.

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