Top 25 Corporate Tax Dodgers

Last Updated Sep 2, 2011 9:33 AM EDT

Twenty-five of the nation's highest-paid chief executive officers took home more pay than their companies shelled out in corporate income taxes last year even though their companies earned an average of $1.9 billion, according to a new study by the Institute for Policy Studies.

Methods of stiffing Uncle Sam vary, but IPS notes that 18 of these "hyperactive tax-dodging" corporations operate subsidiaries in offshore tax havens, such as Bermuda, Singapore and Luxembourg. They've also hired aggressive lobbyists to argue for special tax breaks that can cause these companies to essentially reap tax subsidy payments from Uncle Sam.

"Instead of sharing responsibility for addressing our nation's fiscal challenges, these companies are rewarding CEOs for aggressive tax avoidance," said Chuck Collins, co-author of the Institute's "Executive Excess 2011" report.

Far from struggling, most of the companies on the list justified paying their CEOs some 60% more than average big-company CEO by citing "exceptional corporate performance," the study's authors said. Where the average U.S. CEO earned a tidy $10.8 million (that's roughly $5,400 an hour), the CEOs of the biggest tax-dodging companies took home an average of $16.7 million. That translates to roughly $8,350 per hour, or about $66,800 per day.

What companies ranked as the nation's top tax dodgers? According to IPS, the tax-dodging gold medal goes to General Electric, which had a effective federal tax rate of negative 64.1%. The company's pre-tax earnings from U.S. operations were $5.1 billion but it got a stunning $3.2 billion tax refund, according to the report.

Remarkably, that's NOT the lowest tax rate in the survey. International Paper, which earned $198 million in pre-tax profits from U.S. operations and got a $249 million refund, wins that distinction with a negative 125.8% effective federal rate.

But GE beat out the competition by also spending a tidy $41.8 million on lobbying and campaign contributions, while awarding CEO Jeff Immelt a 172% raise. Immelt's total compensation package was worth $15.2 million in 2010, according to the survey. A New York Times expose that ran earlier this year attributed GE's extraordinary ability to cut its corporate taxes to "an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore."

General Electric operates 14 subsidiaries in offshore tax-haven countries, where it has built up some $94 billion in unrepatriated profits that will not be subject to U.S. taxation unless those profits are returned to the U.S. (Not surprisingly, many companies are now lobbying to exempt "repatriated" profits from U.S. taxation.)

It's worth noting that some of the companies on the IPS list dispute the study's figures arguing that they do not account for tax reserves that have been "accrued" to pay deferred taxes. However, report author Scott Klinger notes that deferred taxes are not taxes paid -- and they may never be paid, given the Byzantine way U.S. corporate income taxes are assessed. These figures reflect the taxes paid in 2010, according to corporate financial reports.

In addition, some companies maintain that they paid no taxes because they reported no taxable income in the U.S. Klinger acknowledges that this is sometimes true. But he says the lack of U.S. profitability is often due to accounting gimmickry that could make movie studios (notorious for making profits disappear) envious. For example, what many of these companies do is have their subsidiaries in foreign countries either own their patents or facilities, allowing that foreign subsidiary to drain the U.S. company of profits by charging exorbitant "royalty" or "lease" fees.

Corporate tax avoidance schemes are estimated to cost the federal government some $100 billion annually, Klinger adds. They also create huge disparities in effective tax rates between big businesses and small. Small businesses pay an average of 27% in federal taxes, he notes, while big businesses pay just 11% on average.

"In effect, small businesses are subsidizing big businesses," Klinger says.

Here's the IPS ranking of Top 25 Corporate Tax Dodgers. The companies are ranked by their CEOs pay, highest-paid first.

1. John Lundgren, Stanley Black & Decker; CEO Pay: $32.6 million; Federal income tax: negative $75 million; Subsidiaries in tax havens: 50.

2. Alan Mulally, Ford; CEO Pay: $26.5 million; Federal income tax: negative $69 million; Subsidiaries in tax havens: 3.

3. Aubrey McClendon, Chesapeake Energy; CEO Pay: $21 million; Federal income tax: $0; Subsidiaries in tax havens: 0

4. Gregory Chase, Aon: CEO Pay; $20.8 million; Federal income tax: $16 million; Subsidiaries in corporate tax havens: 128.

5. Robert Kelly, Bank of New York Mellon; CEO Pay: $19.4 million; Federal income tax: negative $670 million; Subsidiaries in tax havens: 10

6. John F. Brock, Coca-Cola Enterprises; CEO Pay: $19.1 million; Federal income tax: $8 million; Subsidiaries in tax havens: 4

7. Ivan Seidenberg, Verizon; CEO Pay: $18.1 million; Federal income tax: negative $705 million; Subsidiaries in tax havens: 0

8. Andrew Liveris, Dow Chemical; CEO Pay: $17.7 million; Federal income tax: negative $576 million; Subsidiaries in tax havens: 64

9. John Strangfeld, Prudential Financial; CEO Pay: 16.2 million; Federal income tax: negative $722 million; Subsidiaries in tax havens: 36

10. James Cracchiolo, Ameriprise; CEO Pay: $16.2 million; Federal income tax: negative $224 million; Subsidiaries in tax havens: 7

11. David Cote, Honeywell; CEO Pay: $15.2 million; Federal income tax: negative $471 million; Subsidiaries in tax havens: 5

12. Jeff Immelt, General Electric; CEO Pay: $15.2 million; Federal income tax: negative $3.25 billion; Subsidiaries in tax havens: 14

13. Patrick Hassey, Allegheny Technologies; CEO Pay: $15 million; Federal income tax: negative $47 million; Subsidiaries in tax havens: 0

14. Robert Coury, Mylan Laboratories; CEO Pay: $15 million; Federal income tax: negative 73 million; Subsidiaries in tax havens: 32

15. Richard Fairbank, Capital One Financial; CEO Pay: $14.8 million; Federal income tax: negative $152 million; Subsidiaries in tax havens: 0

16. Steve Wynn, Wynn Resorts Ltd.; CEO Pay: $14.6 million; Federal income tax: 0; Subsidiaries in tax havens: 16

17. Brian Duperreault, Marsh & McLennan; CEO Pay: $14 million; Federal income tax: negative $90 million; Subsidiaries in tax havens: 105

18. Jim McNerney, Boeing; CEO Pay: $13.8 million; Federal income tax: 13 million; Subsidiaries in tax havens: 42

19. Gregory Q. Brown, Motorola Solutions; CEO Pay: $13.7 million; Federal income tax: $7 million; Subsidiaries in tax havens: 6

20. Eugene Isenberg, Nabors Industries; CEO Pay: $13.5 million; Federal income tax: negative $138 million; Subsidiaries in tax havens: 1

21. Edward Mueller, Qwest Communications; CEO Pay: $13.4 million; Federal income tax: negative $14 million; Subsidiaries in tax havens: 0

22. James Dolan, Cablevision Systems; CEO Pay: $13.3 million; Federal income tax: negative $3 million; Subsidiaries in tax havens: 0

23. Sanjay Jha, Motorola Mobility; CEO Pay: $13 million; Federal income tax: $12 million; Subsidiaries in tax havens: 0

24. John J. Donahoe, eBay; CEO Pay: $12.4 million; Federal income tax: negative $131 million; Subsidiaries in tax havens: 31

25. John Faraci, International Paper; CEO Pay: $12.3 million; Federal income tax: negative $249 million; Subsidiaries in tax havens: 2

Kathy Kristof is the author of Investing 101
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