Taxpayers have been subsidizing CEO pay for fast food companies and other firms due to a loophole that allows unlimited corporate tax write-offs on performance-based compensation for top executives.
From 2011 through 2012, CEOs of the top six publicly held fast food companies, including McDonald's, Yum! Brands, Wendy's, Burger King, Domino's and Dunkin' Brands, hauled in a collective $183 million in fully deductible performance pay, which comes out to be a total tax break valued at $64 million, according to the report.
The so-called "performance pay" loophole in the current corporate tax law first started in 1993 when Congress limited the deductibility of certain executive pay to $1 million. But the law provided an exception for performance-based pay, such as stock options, non-equity incentive plans and stock appreciation rights, as part of Section 162(m) of the Internal Revenue Code. Currently, unlimited amounts can be deducted from corporations’ federal income taxes for costs associated with performance-based executive pay.
Due to the law, companies have shifted more executive compensation packages to meet the performance-based exception as a way to pay less federal taxes. This practice essentially leaves ordinary taxpayers on the hook for the lost tax revenue.
New Report Sheds Light On Taxpayer Subsidies For Fast Food CEO Pay | Progress Illinois