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The Tale of Two Retirements: Changing the Rules that Allow Platinum Pensions for CEOs and Increase Retirment Insecurity for the Rest of Us

October 27, 2015

Retirement benefits for CEOs at corporations have exploded while the rest of Americans struggle to save for retirement.Just look at this statistic: the 100 largest CEO retirement funds are worth a combined $4.9 billion. That's equal to the entire retirement account savings of 41 percent of American families!This rising inequality is the result of rules intentionally tipped to reward those already on the highest rungs of the ladder.While the availability of pension plans for most Americans has dwindled in the last 30 years, more than half of Fortune 500 CEOs receive company-sponsored pension plans. Their firms are allowed to deduct the cost of these plans from their taxes, even if they have cut worker pensions or never offered them at all.Seventy-three percent of Fortune 500 firms have also set up special tax-deferred compensation accounts for their executives. These are similar to the 401(k) plans that some Americans receive through their employers. But ordinary workers face strict limits on how much pre-tax income they can invest each year in these plans, while top executives do not. These privileged few are free to shelter unlimited amounts of compensation in their retirement pots, where their money can grow, tax-free, until they retire and start spending it.The CEO-worker retirement divide turns our country's already extreme income divide into an even wider economic chasm.New analysis by the Government Accountability Office shows that 29 percent of workers approaching retirement (aged 50-65) have neither a pension nor retirement savings in a 401(k) or Individual Retirement Account (IRA).According to a study by the Schwartz Center for Economic Policy Research at the New School, 55 percent of those aged 50-64 will be forced to rely almost solely on Social Security (which averages $1,233 a month).Younger Americans face a particularly difficult time saving for retirement. More than half of millennials have not yet begun to save for retirement, as they lack access to good jobs, and have staggering amounts of student loan debt. Americans under 40 today have saved 7 percent less for retirement than people in that age group were able to save in 1983.The lavish retirement packages for executives and growing retirement insecurity for the rest of us are inextricably linked. The rules now in place create powerful incentives to slash worker retirement benefits as a way of boosting corporate profits and stock prices. And since more than half of executive compensation is tied to the company's stock price, every dollar not spent on employee retirement security is money in the CEO's pocket.Despite these grim findings, it's clear that we can rewrite the rules that have been rigged against the middle class for the last 30 years. Together, we can change this and allow for all Americans to be able to retire with dignity.

Burning Our Bridges: Cutting Offshore Tax Rates Won't Fund Our Infrastructure or Create Jobs

April 1, 2015

This report identifies the 26 U.S. corporations with the largest stockpiles of untaxed overseas profits and analyzes how much they could help meet U.S. infrastructure needs if these firms paid the taxes they owe on their offshore profits (but can legally put off paying).

Fleecing Uncle Sam: A Growing Number of Corporations Spend More on Executive Compensation than Federal Income Taxes

November 17, 2014

The trickle-down theory of corporate tax cuts is alive and well in America. The theory holds that if we cut corporate taxes, corporations will have more money to invest in new jobs. Related to this theory are widely held fears that unless we give in to CEO demands for more tax breaks and direct subsidies, they will close up shop and move their jobs somewhere else.It is a nice theory, but it hasn't worked.Corporations are quick to complain that the U.S. tax rate – 35 percent – is the highest among industrialized nations, but they neglect to mention that the average large corporation paid only slightly more than half that rate – just 19.9 percent – between 2008-2012. Corporate taxes as a share of GDP remain near all-time lows, while corporate profits set another record last year. And yet job creation remains anemic, with more than nine million Americans out of work, almost three million of these for more than six months.Rather than reinvesting their profits in expanding operations and hiring more workers, U.S. corporations are instead engaging in record levels of repurchasing their stock and in buying out competitors through mergers. Corporate stock repurchases have the effect of boosting earnings per share. Higher earnings per share in turn boost stock prices. And since CEO pay is largely dependent on stock price, this pathway leads to soaring levels of CEO pay, even while average worker pay continues to stagnate.Merging with competitors also boosts corporate profits, but rather than leading to more jobs, mergers commonly lead to layoffs as redundant employees are cast off and join the army of unemployed Americans facing an uncertain future.Corporations have also fought for – and won – lucrative loopholes and tax credits that have taxpayers picking up the normal costs of business that corporations used to pay for themselves.

The Disappearing Corporate Tax Base: How to Reclaim Lost Tax Revenue to Rebuild State Budgets

March 27, 2014

Corporations should pay for the public structures that support the national economy and allow their own businesses to prosper. Without a legal and political structure so supportive of commerce and industry, or a national infrastructure for energy development, research, transportation, and communications, or an educated workforce, America would not have the largest economy in the world. That economy allowed American corporations to prosper and our middle class to grow. Businesses that have done well in America should do right by America. It's time for all corporations to step up and contribute to the public systems that ensure we have a free and democratic society in which every American can succeed and thrive.

The Corporate Tax Rate Debate: Lower Taxes on Corporate Profits Not Linked to Job Creation

December 3, 2013

The American corporate tax system is badly broken. Some corporations pay more than a third of their profits in federal income taxes, while other equally profitable firms pay nothing at all. On average, corporations pay just 12.6 percent of their profits in federal income taxes, according to a recent study by the U.S. Government Accountability Office.Corporate and political leaders keep telling us that cutting corporate tax rates will create jobs.Our examination of the evidence found no relationship between cutting tax rates on corporate profits and job growth.We examined the job creation track record of 60 large, profitable U.S. corporations (from a list of 280 Fortune 500 companies) with the highest and lowest effective tax rates between 2008 and 2010 and found:22 of the 30 corporations that paid the highest tax rates (30 percent or more) on their reported profits created almost 200,000 jobs between 2008 and 2012. Only eight of the 30 firms paying high tax rates reported reducing the number of employees between 2008 and 2012.The 30 profitable corporations that paid little or no taxes over three years collectively shed 51,289 jobs; half of these low-tax firms created some jobs, and half shed jobs between 2008 and 2012.Lowe's, the nation's second-largest home improvement store, paid over 36 percent in taxes on reported profits of $9 billion between 2008 and 2010, and hired an additional 28,820 employees between 2008 and 2012.Verizon, the nation's largest wireless provider, reported $32 billion in U.S. profits between 2008 and 2010, yet received tax refunds totaling $951 million and reduced the number of employees by almost 56,000 between 2008 and 2012.In 2004, when a temporary "tax holiday" on offshore profits was put in place, 58 firms brought $218 billion in profits back to the U.S. under the program, for a savings of $64 billion on their taxes. In the following two years, those 58 firms eliminated 600,000 jobs.In 2012, U.S. corporations reported earning nearly $1.8 trillion in profits. Had they paid the 35 percent tax rate on those profits, total corporate tax receipts would have been $630 billion (rather than the $242 billion they actually paid), and the deficit would have been reduced by nearly a third.Today, large U.S. corporations report more than $1 trillion in cash or liquid assets. They have the funds to invest in new jobs, should they choose to do so. We found no evidence that cutting the tax rate on corporate profits induces firms to create new jobs in the United States. However, several legal loopholes and deductions do discourage job creation in the U.S. and should be eliminated. This would raise significant revenue and make the tax code fairer.

Platinum-Plated Pensions: The Retirement Fortunes of CEOs Who Want to Cut Your Social Security

November 19, 2013

In the current budget debate, the loudest calls for Social Security cuts are coming from two lobby groups led by CEOs who will never have to worry about their own retirement security.Fix the Debt is a PR and lobby machine launched in 2012 and led by more than 135 CEOs of major corporations. Seeking broad public support, this campaign has publicly couched their calls for reduced spending in vague euphemisms like "protecting and strengthening Social Security."The Business Roundtable, a 40-year-old association made up of about 200 CEOs of America's largest corporations, has not attempted to sugarcoat their draconian agenda. They are calling for an increase in the Social Security retirement age to 70 and a change in inflation calculations that would further reduce benefits.Meanwhile, Business Roundtable and Fix the Debt CEOs are sitting on massive nest eggs of their own. This report, co-published by the Center for Effective Government and the Institute for Policy Studies, focuses on the retirement funds of Business Roundtable members, but the two groups have considerable overlap. More than half of the Roundtable's Executive Committee members and a quarter of their total members are affiliated with Fix the Debt.