Tax Loopholes Widen Giant Pay Gap between Workers, Execs

Just like the corporations they work for, multi-millionaire executives have become experts at accounting tricks to avoid paying taxes, according to a new study that builds on last month's Government Accountability Office report.

The GAO said a majority of American and foreign companies doing business here pay no income tax. Now "Executive Excess 2008: How Average Taxpayers Subsidize Runaway Pay" shows how CEOs and other top executives shield huge portions of their income and stock options from tax obligations. The report was published this week by the Institute for Policy Studies and United for a Fair Economy.

For instance, unlimited deferred compensation accounts, a perk for CEOs at large companies, add up to $80.6 million a year in lost tax revenue. The median value of top executives' deferred payments is $4.5 million, according to Equilar, a pay analysis firm. Most of the rest of us, however, are limited to a maximum of $15,500 a year we can shield in a tax-deferred 401(k) account.

The authors of the report say the tax loopholes make the huge and growing gap between worker and CEO pay even bigger. They say labor law reform, specifically the Employee Free Choice Act, is critical. "Without legislative action to allow more workers the right to organize, the divide between compensation for top executives and the rest of us will only continue to grow."

The report can be downloaded at http://www.ips-dc.org/reports/#623.