To be fair, I would want to have all of the executive names and corporate names redacted out.
But I think it would be clearly eye-opening to US taxpayers as to the extent of the number of employer-provided other employee benefits to these highly-paid executives, as well as the dollar amount of each of these employee benefits.
Armed with this key information, I think the public will be in a much better position to decide what is the best way to fund US Deficit reduction.
In two earlier recent posts, I addressed two very substantial company-provided employee benefits received by highly-paid executives.....namely employer-provided health insurance and salary deferral to 401(k) Profit-sharing plans. And yes, the US Government allows these two significant executive compensation components to be either tax free forever or tax deferred for many years for US federal income tax purposes.
In this post, I will address other Employee Benefits received by highly-paid employees which also are tax free. I only will be covering a small handful of them. To get to the true extent of how many there are, you need the US Government to disclose that to the public.....that is being financially transparent.....salient information the public needs to properly make an informed assessment as how best to fund a US Deficit reduction.
So anyway, here goes a handful of these tax free employee benefits received by highly-compensated executives:
1) Health Savings Accounts.....this one is huge
2) Archer Medical Savings Accounts
3) Accident and Health Insurance
4) Child and Dependent Care Services.....up to $5,000 per year
5) Disability Coverage
6) Group-term Life Insurance.....a portion is now taxable
7) Adoption Assistance Programs
8) Cafeteria Plans
9) Flexible Spending Arrangements
10) Qualified Retirement Planning Services
11) Employee Educational Expenses.....up to $5,250 per year
12) Health Reimbursement Arrangements
13) Post-Retirement Health Care and Other Benefits.....this one is huge
And there are so many others. When you add up the total dollar amount here of tax free income, it is really incredibly huge.
And then on top of that, you have highly-paid executives receiving substantial retirement benefits. The dollar amounts of retirement benefits to highly-paid executives I find frankly obscene. I already addressed in another post the huge salary deferral one.
But below here are some other retirement benefits for highly-paid employees that could easily and fairly be reduced, which would give a lower US federal income tax deduction to the employer, and thus higher Tax Revenues received by the US Government, and the first two below have annual maximum limit amounts which increase each year. Further, if you decrease the annual maximum limits, you also decrease substantially the amount of the subsequent tax-deferred earnings growth of these retirement plans.
1) $200,000 employee maximum benefit limit in 2012 for a defined benefit plan
2) $50,000 employee maximum defined contribution plan limit for 2012
3) No $17,000 annual limit on employer matching contributions for 2012
4) Employer deduction for contributions to a defined contribution plan is the greater of (a) 25% of compensation and (b) the amount the employer is required to contribute to a SIMPLE 401(k) plan.
Just think how incredibly lucrative the tax loophole is for just #2) above. The company making the $50,000 profit-sharing contribution to the highly-paid employee gets an immediate tax write off for the $50,000. And the end result is the highly-paid employee can get up to $50,000 per year in profit-sharing contributions made to his tax-deferred account, and this $50,000 maximum limit grows each year. This highly-paid person works for this company for just 20 years, and could very easily have more than $2 mil accumulated in his tax-deferred account at the end of 20 years, which includes the tax-deferred earnings for 20 years. And after 20 years, he is probably still only in his 40s!
When the country has this $16 trillion of debt, and conservatives in the US Congress are lusting over substantially reducing Medicare Benefits and Medicaid Benefits of lower and middle income retirees, and these same US Congressmen have legislated for the tax-deferred massive US Government funding to multi-millionaire status for hundreds of thousands, and perhaps even millions, of these already pretty well-heeled profit-sharing participants, there is something clearly wrong with the justice of what has happened here.
These conservative Republicans, and even many Democrats who have voted the same way, have created a US economic environment where only the already very well off get much more well off, and everyone else flat out struggles financially.
This is wrong, and I mean seriously wrong. The Occupy Movement has totally missed the massive injustice that has happened here with the many gargantuan employee benefit tax loopholes to the already well-heeled.
And lower and middle income retired people have every right to be outraged with what the US Congress has facilitated here. And now the US Congress wants to dramatically cut their Medicare Benefits? Give me a break!
But it's not just tax deferred Profit Sharing Retirement Plans. Just check out what happened below to the Increase in Accrued Pension Benefits of the CEOs of five Big Corps, which have defined benefit pension plans. This information is derived from Proxy Statements which are filed with the SEC annually.
| Three Year | ||||
| 2011 | 2010 | 2009 | Total | |
| Increase | Increase | Increase | Increase | |
| in Value of | in Value of | in Value of | in Value of | |
| Pension | Pension | Pension | Pension | |
| CEO of | Benefits | Benefits | Benefits | Benefits |
| 000's | 000's | 000's | 000's | |
| Exxon Mobil | 9,755 | 7,476 | 5,467 | 22,698 |
| Pfizer | 6,893 | 10,977 | 1,916 | 19,786 |
| AT&T | 3,330 | 7,096 | 8,990 | 19,416 |
| Johnson & Johnson | 3,435 | 7,085 | 7,983 | 18,503 |
| Chevron | 6,592 | 2,273 | 1,554 | 10,419 |
| Total all 5 | 30,005 | 34,907 | 25,910 | 90,822 |
Yeah, that's right, $91 mil increase in the value of their Pension Benefits in just the past three years, for only five CEOs. When you extrapolate this over the entire universe of all highly-paid executives, the total amount of Increase in Pension Values in the past three years has to be just incredibly mind boggling. And that's just the increase.....the actual Pension Values must be totally off the charts. And yes, earnings on Pension Assets are tax deferred. Not only does the Big Corp get an income tax deduction on the front end, but the highly-paid executive doesn't get his pension income taxed until it is distributed usually many, many years later.
This is clearly another case of US Congress overreach on tax deferrals for the already financially well-heeled.....the lucrative tax incentives put into the Tax Code here by an irresponsible US Congress, legislating for the wealthy, has resulted in a situation where defined benefit pension plans and profit-sharing plans can be fairly labeled as "Tax Deferral Gone Wild".
And the Obama Administration had a lot to do with these massive increase in Pension Values due to the stock market moving up dramatically during the Obama Administration.
And another obscene compensation tax loophole for rewarding highly-paid executives is the increasingly popular use of company restricted stock.
And this restricted stock award to highly-paid executives can be creatively structured to allow for the deferral of all tax until the time of the sale of the stock, and for all appreciation to be taxed then at very low capital gain rates.
Yeah that's right, the executive gets this clearly very lucrative restricted stock bonus award, and doesn't have to pay a dime of tax when it is given to him.
And to pile on, when the stock goes up in value and sold, it is possible to recognize the gain at very favorable capital gain tax rates.
This US Government tax largesse in the restricted stock area is another case of the US Government piling on the welfare to the highly-paid executive, and at the same time, the many conservatives in the US Congress doing everything in their power to keep the unemployed from getting unemployed benefits, even though these same US Congress "legislators for only the already well-heeled" and "filibusterers" are the ones who are also preventing desperately-needed US economic stimulus from happening, which could change the status of many of these unemployed to employed, and could also change the status of many underemployed to "employed on a full-time basis".
From my perspective, this whole restricted stock to highly-paid executive scheme, the massive profit-sharing and pension tax deferral, the very significant tax-free Health Savings Accounts, and all of the other very significant above Employee Benefit tax loopholes is nothing short of welfare to the rich....both to the highly-paid executive and to the corporation. It is another case of the US Congress, on both sides of the aisle, continuing to legislate only on behalf of the wealthy, thereby further expanding the economic gap between the very wealthy and everyone else.
And all of the above tax loopholes for the wealthy executives and the rich corporations do absolutely nothing to create US jobs.
But yet from eliminating all of the above Other Employee Benefit Tax Loopholes of the very wealthy executive and of the corporation, there would be all of this massive positive US Government CBO Scoring that could be wisely used mostly for very healthy near-term US full-time job creation economic stimulus.
And some of these US Government funds can also be used to reduce the US Debt.
The above Other Employee Benefit Tax Loopholes here overwhelming favor the very wealthy employees.....they are the ones taking the maximum benefit from them and at a tax benefit rate that is substantially higher than the tax rate that would apply to regular employees. And in the case of restricted stock awards, the ultimate tax rate paid by the executive can be at extremely favorable capital gain tax rates.
Thus, the focus of sound, fair US governance should be to address the most egregious element here, and that clearly is the substantially higher tax largesse received by an employee having a very high Adjusted Gross Income.
But to be totally fair, I would scale in the elimination of these Other Employee Benefit Tax Loopholes, and thus the amount of this tax loophole elimination would increase as Adjusted Gross Income above $250,000 increases, but for sure, anyone with Adjusted Gross Income above $1 million would get the entire amount of these Other Employee Benefit Tax Loopholes eliminated for US federal income tax purposes starting in 2013.
OK, so that's what I think is the very convincing case for eliminating these above numerous, large dollar Other Employee Benefit Tax Loopholes for the very wealthy employee.
And the money raised here by the US Government from the closing of so many of these Employee Benefit Tax Loopholes over the next ten years would be just huge.
But what to do with the massive amount of positive ten-year CBO scoring that results from eliminating these Other Employee Benefit Tax Loopholes, which overwhelmingly has benefited the very wealthy employee?
One simple answer.....spend a huge portion of it to maximize, in the near term, full-time, sustainable US job creation, at a livable wage.
Thus, here's my optimal list of effective, quick-hitting, directly-targeted US economic stimulus, which optimally maximizes US job creation, and gets the most bang for the buck.
First, heavy US infrastructure investments, which also is wisely funded in part by user charges.
Second, heavy US school, US community college, and US public college construction fix ups, with a particular focus on climate change benefiting energy-efficiency investments, which also have an additional benefit of economically saving future energy costs.
Third, heavy US Government energy efficiency investments, with those made by the US military leading the way here. And a huge part of the funding here would come from the future year energy cost savings.
Fourth, for all of 2013, all US businesses should be allowed 100% first-year tax expensing of equipment purchases, and also much more highly accelerated first-year tax depreciation on new building and building remodelings, and also investment tax credit on both equipment and building investments, but these massive tax benefits are earned only if the US business also increases its US full-time payroll counts by sufficient amounts, and with this payroll count increase remaining for at least three years, or else these lucrative tax benefits are recaptured. A significant portion of the funding of the fourth one here is the self-funding coming from the additional US Government Revenues (i.e. the higher individual income taxes and payroll taxes) derived from the necessary increase and retention in full-time payroll counts in order for the US businesses to be able to earn the tax benefits.
Fifth, an extension of renewable energy tax credits for four years, and making them refundable, with all of this paid for by the permanent elimination of all Oil and Gas tax subsidies of larger Oil and Gas companies, including not just repeal of expensing of intangible drilling costs, and repeal of percentage depletion, but also repeal of LIFO Inventory for Oil and Gas companies, the elimination of the domestic activities production deduction for Oil and Gas companies, and eliminating the incredibly egregious US tax policy of permitting foreign royalties paid by Oil and Gas companies to be used as dollar-for-dollar foreign tax credits for US federal income tax purposes.
Sixth, a substantial increase in US Government Research expenditures for critical long-term initiatives, including, among other things, for advanced manufacturing, for high technology, for education and employment training, for medical research, for research on better, more effective, and less costly health care delivery, and for climate change research.
Seventh, for all of 2013, US multinational corps would be allowed to repatriate their foreign earnings, at a somewhat discounted US federal income tax rate, which would be at a very progressive US federal income tax rate based on the amount of foreign earnings repatriated. However, to earn this discounted US federal income tax rate, a US multinational corp would have to increase its US full-time payroll count in 2013 by a sufficient amount, and this increased payroll count must be retained for at least three years, or else the very lucrative tax benefits of this discounted, very progressive US federal income tax rate would be recaptured. The end result here is that this seventh tax incentive, instead of costing the US Government money, will actually substantially increase US Tax Revenues.
Eighth, enhance the current domestic production activities deduction to 10.7%, and increase it even more for advanced manufacturing. This will also be paid for by the permanent elimination of all Oil and Gas tax subsidies, explained in detail in the fifth one above.
Ninth, make the current R&E tax credit over a base amount permanent, and increase the simpler R&E tax credit over a base amount option from 14% to 17%. This would be paid for by the fifth one above related to the elimination of all annual tax subsidies of all larger Oil and Gas companies, by the seventh one above related to foreign earnings repatriation, and by the initiation of new annual minimum tax on foreign earnings.
The key point here is that to best bring down the US Deficit, by far the best way is to wisely and prudently decrease both US unemployment and US underemployment as dramatically and as quickly as possible.
