{"id":17000,"date":"2012-08-20T07:41:38","date_gmt":"2012-08-20T06:41:38","guid":{"rendered":"http:\/\/www.taxresearch.org.uk\/Blog\/?p=17000"},"modified":"2012-08-20T07:41:38","modified_gmt":"2012-08-20T06:41:38","slug":"ceo-pay-tax-cuts-accounting-fraud-and-political-corruption-an-everyday-tale-of-2012","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2012\/08\/20\/ceo-pay-tax-cuts-accounting-fraud-and-political-corruption-an-everyday-tale-of-2012\/","title":{"rendered":"CEO pay, tax cuts, accounting fraud and political corruption: an everyday tale of 2012"},"content":{"rendered":"

The Wall Street Journal has reported a new report<\/a> by the US based Institute for Policy Studies.<\/p>\n

There argument, backed by analysis, is that the US tax code is designed to reward CEOs<\/span><\/span> by giving massive tax breaks to high CEO pay. The result is plain to see:<\/p>\n

The policy institute's study identified 26 <\/span>CEOs who averaged $20.4 million in total compensation last year, including bailed-out Citigroup's <\/span>Vikram Pandit<\/span><\/span> and bailed-out AIG's Robert <\/span>Benmosche. \"That's a 23% increase over the average for last year's list of 2010's tax dodging executives,\" the study said.<\/p>\n

All the major corporations cited in the report paid more to their CEOs<\/span><\/span> than they did in federal income taxes (which the study calls \"tax dodging\"). The study also said that thanks to the Bush tax cuts, CEOs<\/span><\/span> at 57 major U.S. companies each saved more than $1 million in personal income taxes.<\/p><\/blockquote>\n

That's what CEO capture of\u00a0corporate\u00a0power in turn leading to\u00a0corporate\u00a0capture of the tax\u00a0code\u00a0has lead to.\u00a0No wonder\u00a0inequality\u00a0is growing.<\/p>\n

And as Joseph Stiglitz<\/span> argues in his book \"The Price of\u00a0Inequality\", that's massively\u00a0destructive\u00a0for the economy as a whole.\u00a0<\/span><\/p>\n

Does this matter? Well, yes: this will, as, John Authers<\/span> argues in the FT this morning<\/span><\/a> be an issue at the core of the US presidential election debate:<\/p>\n

There is a distinguished tradition that holds that cutting taxes for the wealthy creates incentives for greater profits, and wealth creation. It is hard to combine deficit hawkery with\u00a0advocacy of tax cuts\u00a0even for the wealthiest in society \u2014 as it appears the Republican ticket will do \u2014 without believing this to be true.<\/p>\n

There is also a tradition in economics holding that cutting taxes for the wealthy will not stimulate growth. These two schools will argue it out for the next three months.<\/p><\/blockquote>\n

But as he also points out, if the growth that results is simply distorted reporting of profits created by\u00a0abusing\u00a0accounting rules, and over the last\u00a0decade\u00a0there is considerable evidence that much of the growth\u00a0corporates\u00a0have\u00a0delivered\u00a0has been of this sort, then there is no link between tax cuts and growth at all. The tax cuts are simply a way to pay the distorted rewards of\u00a0distorted\u00a0profit reporting more cheaply.<\/span><\/div>\n
<\/div>\n
That then makes a mockery of another\u00a0commentators\u00a0view in the FT today. Gavyn Davies, a man so New Labour he combined\u00a0Goldman\u00a0Sachs and New Labour support, says:<\/a><\/div>\n
\n

I for one have no trouble accepting that more business friendly tax and regulatory policies would have beneficial supply side effects.<\/p><\/blockquote>\n

\u00a0before adding:<\/div>\n<\/div>\n
\n
However, we need to see this in context. Most business surveys report that the greatest source of policy uncertainty is the fiscal cliff at the year end, not the tax and regulatory regime. This, the\u00a0euro crisis\u00a0and the recession itself, are the main reasons why businesses are reluctant to hire and invest. And that will be much harder to fix than candidate Romney contends.<\/div>\n<\/blockquote>\n

The combination shows, if I might be so bold, the way in which people like Davies have captured the system for gain. He argues for tax\u00a0cuts\u00a0and\u00a0deregulation, all of which will make the rich richer and life for the rest harder before then admitting they won't change anything except\u00a0inequality, which will increase.<\/span><\/p>\n

The\u00a0trouble\u00a0is, people\u00a0listen\u00a0to him as he has money and\u00a0Goldman\u00a0Sachs behind him.<\/span><\/p>\n

And that, in my view, is what modern political\u00a0corruption is: the advocacy of policy from a position of power created by the capture of wealth even when you know that policy won't\u00a0work\u00a0and you're only suggesting it for the sake of your own private gain. \u00a0The Romney \/ Ryan campaign is the archetype, but let's not think it's by any means alone.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Wall Street Journal has reported a new report by the US based Institute for Policy Studies. There argument, backed by analysis, is that the
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