CEO Salaries In Major American Companies Higher Than Taxes Paid To Government, Says Study

The salaries of Chief executives in leading American companies are skyrocketing but the volume of tax pay out to the Federal government is depleting. This anomaly has been brought home by a study conducted by two Think Tanks. They have quoted some jarring figures to substantiate their point and called for urgent reforms in the corporate tax sector. In the study called "Fleecing Uncle Sam," the think tanks took a strong view of the bulging CEO salaries and thinning corporate tax pay out, notably since 2010. The study was prepared by the Institute for Policy Studies and the Centre for Effective Government based in Washington.

Corporate Tax

The actual U.S. corporate tax rate is 35.3 percent, according to federal law. But in reality, most large corporations' pay a far lower rate and the study claims that large American companies pay only an effective corporate tax rate closer to 12.6 percent, according to the Government Accountability Office.

There are many things that contribute to the lowering of corporate tax bill, such as write-offs research and development costs, depreciation of buildings and equipment. Most firms find ways to loosen the tax burdens. As a result, the gap between what they pay to the federal government and their top executives is widening perpetually. The study noted that the average compensation paid to CEOs has touched almost $32 million from the $16.7 million in 2010, according to a report in the Fortune magazine.

Seven Big Shots

The seven big firms named in the study are Boeing, Ford, General Motors, Chevron, Citigroup, Verizon and JPMorgan Chase. They are highly profitable and reported more than $74 billion in combined pre-tax profits and paid their CEOs an average of $17.3 million, said a report by Newser.

It found that 29 of the 100 highest-earning chief executives in America are earning more than what the firms pay to Uncle Sam. All the seven firms also received a combined total of $1.9 billion in refunds from the Internal Revenue Service and gave them an effective tax rate of negative 2.5 percent.

Flawed System

The study called for drastic reforms in the corporate tax system and referred to the unproductive use of the cash pile. The substantial savings made in billions are not used in expanding operations or hiring workers. Rather they are used for repurchasing stock and also for financing corporate mergers, according to the report, which called the government to overhaul the "deeply flawed" corporate tax system and crack down on tax havens. However, the seven companies, responding to the report said they are good tax citizens and abide by all tax laws. Only Verizon denied that its CEO is paid more than the federal taxes, according to a report from Reuters.