Managing Diversity

Topics: Taxation in the United States, Tax, Deferred compensation Pages: 2 (1279 words) Published: April 20, 2014
In the article, “Executive Excess 2008: How Average Taxpayers Subsidize Runaway Pay,” by author Sarah Anderson, the author takes a look into top CEO compensation plans and how the rich are saving on taxes. The article begins by stating its opinion on this matter, which is described in the article as unlawful and unjust. The author strongly believes that it is unfair for CEO’s to be paid so highly, and on top of that to be able to utilize tax strategies that create even more wealth for them. This is argued throughout the article. The first topic that the article touches on are tax subsidies for high income earner top executives, and tax loopholes that are involved with the matter. The article states that, “The U.S. tax code currently is riddled with loopholes that allow top corporate and financial leaders to avoid paying their fair share of taxes.” The strategy of preferential capital-gains treatment of carried interest is discussed in which executives are saving hundreds of thousands of dollars in taxes. As the author points out, it may seem that these high income earners would not need extensive help in the tax field, but they actually heavily utilize tax loopholes. The second strategy discussed in the article is unlimited deferred compensation plans. Executives are deferring huge amounts of cash now, and withdrawing when they are taxed at lower levels. In comparison, the average tax paper is locked down with strict limits on how much income can be deferred, being left with the higher cost in taxes. An astonishing example is given in the text which shows that an executive that defers and is taxed on $100 is left with $104, which an average tax paper is taxed on the amount and then left with a mere $89 after an investment strategy is put into place. Another form of deferred compensation strategy that is being utilized by top executives is the offshore deferred compensation plan in which money is being transferred into such plan across national borders. The...
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