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Donald Trump's high-powered CEO council draws scrutiny

12/02 MoneyWatch
Unemployment at lowest level in nearly a decade, and other MoneyWatch headlines 01:12

President-elect Donald Trump named a high-level CEO advisory committee on Friday to furnish guidance about economic growth. The 16-member council, though, has corporate chieftains whose company taxes could benefit from his policy proposals.

At least four of the chief executives on Trump’s committee lead companies whose taxes were reduced or even eliminated by parking billions in earnings overseas, where corporate taxation often is lighter than in the U.S. 

Potential impact of President-elect Trump's economic plans 03:55

In addition, the group’s chairman, Steven Schwarzman, head of the private equity firm Blackstone Group (BX), has been a longstanding defender of what’s called carried interest, which hugely benefits his investment company. Carried interest is the 20 percent of profits that a private equity firm like Blackstone rakes off when it sells one of the companies it owns. This money is taxed at 23.8 percent, far below the 39.6 percent top income tax rate for individuals in the U.S.

Blackstone was one of the founders of a lobbying consortium now called the American Investment Council, which has stood against congressional bids to tax carried interest more heavily -- and Donald Trump himself on the campaign trail vowed to ban the tax-advantaged payment method.

In 2010, as the Obama administration sought to raise the tax on carried interest, Schwarzman told a meeting of private equity operators that the assault on their favorable tax treatment was akin to war. Then he went on: “It’s like when Hitler invaded Poland in 1939.”

A Schwarzman spokesperson said the committee “isn’t intended to be the type of thing where people bring individual agendas. The purpose is to be a sounding board and a source for independent knowledge from the private sector.”  

The other Trump corporate committee members who head companies with lighter tax treatment from overseas business include: Jamie Dimon of JPMorgan Chase (JPM), which the Wall Street Journal found in 2013 had $25.1 billion offshore the year before; Ginni Rometty of International Business Machines (IBM), which had $44 billion offshore in 2012; and Jack Welch, formerly of General Electric (GE), which held $108 billion offshore that year. 

In fairness, Welch left GE after two decades as CEO in 2001 and has witnessed his hand-picked successor, Jeffrey Immelt, take the company in another direction. It’s not clear how many billions JPMorgan, IBM or GE currently hold overseas.

Another Trump council member, Mary Barra, chief executive of General Motors (GM), saw her company benefit in 2015 when it paid no taxes because of a $1.9 billion European tax credit, despite worldwide pretax earnings of $7.7 billion, according to a USA Today analysis.

The 16-member President’s Strategic and Policy Forum will hold its initial meeting at the White House in the first week of February, a couple of weeks following Trump’s Jan. 20 inaugural.

“This forum brings together CEOs and business leaders who know what it takes to create jobs and drive economic growth,” President-elect Trump said in a statement. “My administration is committed to drawing on private sector expertise and cutting the government red tape that is holding back our businesses from hiring, innovating, and expanding right here in America.”

Barack Obama had a similar advisory group, although its ranks were heavily represented by technology CEOs.

A Reuters investigation in 2013 found that 74 percent of the 50 biggest U.S. technology groups used tactics like overseas subsidiaries to cut their tax bills.

Despite widespread calls for U.S. tax reform -- including a White House proposal this year for a “tax holiday” for companies that bring cash back home and similar calls by candidate Donald Trump -- the overhaul remains enmeshed in a tangle of special interests.

CEOs on the Trump panel come mostly from the manufacturing and financial sectors. The committee did not include any representatives from drug or tech companies, which are especially noted for their overseas tax hoarding. Keeping money overseas is particularly easy for technology and pharmaceutical companies, whose profits stem from intellectual property that can be moved overseas via email rather than shipped as physical goods.

Critics of the new committee said it was too tilted toward large companies. “Many of the multinationals represented on his new forum continue to lobby for tax cuts and deregulation that help them win at the expense of small business and consumers,” said David Brodwin, co-founder of the American Sustainable Business Council, an advocacy group.

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