Corporations and CEOs Versus Labor? Who Do Politicians Serve?

"And the Laborer is worthy of his hire"
King James Bible, New testament, 1 Timothy, 5:18

In the United States, and in other countries, there has been a growing gap, to the point of becoming a vast chasm, between a few extremely wealthy individuals, and the rest - the majority - of citizens who are in the demographic of middle class or below.  The problem is more severe in the U.S. than in most other comparably developed countries.

CEOs are just one group of those who are unfairly benefiting from a redistribution of wealth from the many to the few.  The policies, including tax policies, advocated by the right wing, conservatives, the GOP and Tea Party, which in turn impacts our national debt and deficit.  (The following article is indented; enlarged type and bold type are my additions for emphasis, along with full-width commentary.)

From the Star Tribune:
Ameriprise CEO's cut is bigger than Uncle Sam's
Article by: JENNIFER BJORHUS , Star Tribune Updated: September 1, 2011 - 9:09 AM

Ameriprise named one of 25 firms whose CEO pay topped its corporate income tax payment.
Ameriprise CEO Jim Cracchiolo made $16.3 million, while the firm got back $224 million in U.S. income taxes.

Ameriprise Financial paid chief executive James Cracchiolo more last year than it paid Uncle Sam in corporate income taxes.

Despite recording nearly $1.1 billion in profits last year, Ameriprise actually got back $224 million in federal income taxes, according to a study out Wednesday from the Institute for Policy Studies, a Washington think tank focused on social justice issues and executive compensation.

That made it one of 25 companies, including such household names as Coca-Cola, Ford, Honeywell and eBay, that paid their CEOs more than they paid the federal government last year, according to the "Executive Excess 2011" report.

Minneapolis-based Ameriprise Financial, where Cracchiolo made $16.3 million last year, is the only Minnesota company on the list.

The 25 companies reported average global profits of $1.9 billion last year. But through a variety of accounting techniques, tax breaks and loopholes they managed to shave millions off their actual tax payments, and in many cases got money back from the Internal Revenue Service, the report said. They averaged tax refunds or credits of about $300 million each.

"The low IRS bills these companies faced reflected tax avoidance pure and simple," the report said.

At the top of the report's list, ranked by total CEO compensation, is New Britain, Conn.-based Stanley Black & Decker. CEO John Lundgren recorded total compensation of $32.6 million last year, while the company got a federal corporate income tax credit of $75 million.

Also on the list: General Electric Co. CEO Jeff Immelt's compensation package last year totaled $15.2 million. The company, which had global profits of $11.6 billion, scored a tax credit of nearly $3.3 billion.

Ameriprise Financial spokesman Ben Pratt said the company doesn't dispute the report's numbers. But he called the $224 million tax refund "very misleading" because it doesn't reflect the company's entire tax picture. The company set aside a total provision for taxes of $334 million last year, he said, and is following generally accepted accounting principles and U.S. tax law.

"Ameriprise pays its fair share of taxes," Pratt said. 

What spokesperson Pratt calls a fair share of taxes is undoubtedly reflecting payment of the taxes legally required of them.  Whether this is a FAIR share of taxes however, is far from the case, not only in my opinion but in the opinion of experts.  We have huge loopholes, which unfairly favor corporations.  Those corporations in turn are accumulating and consolidating huge reserves of cash, and a far larger share of those reserves and of their corporate income is now going into the pockets of executives than had previously been the case.  At the same time, the lower echelons of employees are receiving less compensation, and being asked to pay for more of their expenses, particularly in the area of health insurance and retirement funds.  Middle class workers, particularly union workers including those in the manufacturing and public sectors are being targeted.  Studies like this from 2005, document that dramatic increase in executive compensation, out of all proportion to actual job performance.  The trends noted in 2005 have continued, and in some instances become even more extreme.

For example, from the 2005 study (NOT the STrib article):

• At the 350 largest public companies, the average CEO compensation is $9.2 million.  Compensation for oil and gas execs increased by 109% between 2003 and 2004. 
• In 2004, the average CEO received 240 times more than the compensation earned by the average worker.  In 2002, the ratio was 145 to 1. 
• These levels of compensation are not the norm for the industrialized world. Typically, CEO pay in other industrialized countries is only about one-third of what American CEOs make. 
• Highly compensated CEOs are not being rewarded for performance with the shareholders in mind, the 'textbook' explanation of CEO compensation, according to an extensive body of research and reporting. 

Similarly programs like Social Security, with the lifting of caps, would similarly remove any deficiencies in future funding of the program, as is, without any measures which could reduce payments to recipients. EVER.

Despite that an overwhelming majority of voters - often polls show in the upper 70% to 80% range - support taxing the wealthiest, who usually pay an effective tax rate far lower than the rest of us. However the right refuses to allow any progress on either increases in revenues through allowing the Bush Tax cuts, which disproportionately benefited that upper narrow percentage of wealthiest people, which would go a long way towards balancing our budget, and which is responsible for more than half of our deficit.

These are the so-called 'job creators', who don't in fact create jobs.  There is absolutely no factual evidence which supports that giving the wealthy even more money has lead or will lead to creation of jobs.  What creates jobs is an increase in demand.  What increases demand is for the largest possible number of consumers to want to purchase either goods or services (preferably both).
The STrib article continues:

Pratt forwarded a note about the report issued by the Center on Executive Compensation in Washington, D.C. The industry-backed lobbying group called the report "salacious."

Shareholders expect companies to minimize their taxes within the bounds of the law, the group said. It also said the report leaves out a variety of other taxes companies pay, such as those paid to state and foreign governments, and deferred taxes.

Scott Klinger, one of the study's authors at IPS, said Ameriprise Financial's response is typical. Companies prefer to discuss their total tax provisions, which include future deferred tax liabilities they may or may not pay, as opposed to what actually goes out of their pockets to the IRS in a given year.

"We're interested in what they actually paid this year," Klinger said, "not the taxes they may potentially pay in the future."

Budget debate

While it's well known that U.S. corporations employ elaborate tax strategies to lower their obligations, the study comes amid heightened concern over the practices.

Corporate taxes have been part of the hyper-charged debate over how to lower the country's deficit -- taxes and/or revenue. Tax reform is expected to be a major issue for the new super committee charged with cutting the deficit, although it's not clear the panel will tackle closing corporate tax loopholes. 

Closing loopholes, which benefit corporations and CEOs and other executives, along with subsidies, is another area that the right refuses to discuss, and refuses to support.  It is another way in which the right makes the rich richer, and the rest of us poorer.

On another front, heavyweight U.S. corporations such as Google and Pfizer are backing a tax holiday bill called the Freedom to Invest Act of 2011 that would enable them to repatriate profits they've parked overseas at a greatly reduced U.S. tax rate.

"There's a tremendous amount of interest in re-examining the corporate income tax today," said Edward D. Kleinbard, a professor at the University of Southern California and former chief of staff for the congressional Joint Committee on Taxation.

Kleinbard said there are basic flaws in the corporate tax system: It doesn't cover enough types of companies, the tax rate is too high relative to the rest of the world and U.S. multinational corporations have become extremely adept at shifting income so it is taxed nowhere, which Kleinbard calls "stateless income."

 Some of the companies' reduced tax liabilities in the report can be explained by the fact that companies that lose money take losses from one year and apply them to other years to reduce tax liabilities, common accounting techniques known as loss carryforwards and loss carrybacks, Kleinbard noted. Losing money isn't a tax strategy, he noted.

Klinger, at IPS, said losses are "a piece of the story" but hardly the sole reason some companies pay so little in taxes.

Kleinbard and others said that executive compensation and corporate income tax are separate issues. 

While they may be 'separate' issues, they are also so closely related as to be the two separate sides of the same coin.

The amount companies get to deduct for executive compensation is "chicken feed" for corporations of this size, said Dan Schermer, a tax lawyer in Minneapolis who used to work for the Justice Department prosecuting tax evasion cases.

"All these tax breaks, all they do is erode the tax base," Schermer said. "A million-dollar tax credit is the same as a million dollar expenditure straight from the Treasury.

"The real scandal is Congress allowing it in the first place."
FULL TEXT: The full report can be read on the IPS website

Seems like someone has forgotten 'The laborer is worthy of his hire", not just the CEOs and the wealthy few.  The 2012 elections would be the perfect occasion for a reminder - if not sooner.