Washington DC — Ordinary taxpayers are subsidizing exorbitant executive pay at the top fast food corporations, according to a new report by the Institute for Policy Studies.

The report focuses on the loophole that allows corporations to deduct unlimited amounts from their income taxes for the cost of executive compensation —as long as the pay is in the form of stock options and other so-called “performance pay.” This loophole serves as a massive subsidy for excessive executive compensation.

Among the key findings from the report ‘Fast Food CEOs Rake in Taxpayer-Subsidized Pay’:

• During the past two years, the CEOs of the top six publicly held fast food chains pocketed more than $183 million in fully deductible “performance pay,” lowering their companies’ IRS bills by an estimated $64 million. The average annual subsidy per CEO was $5.4 million.

YUM! Brands enjoyed the biggest taxpayer subsidy for its CEO pay largesse. This firm, which owns Taco Bell, KFC, and Pizza Hut, paid CEO David Novak $94 million in fully deductible “performance pay” over the years 2011 and 2012. That works out to a $33 million taxpayer subsidy to YUM! – just for one executive’s pay.

McDonald’s received the second-largest government handout. As CEO in 2011 and the first half of 2012, James Skinner pocketed $31 million in exercised stock options and other fully deductible “performance pay.” Incoming CEO Donald Thompson took in $10 million in performance pay in his first six months on the job. Skinner and Thompson’s combined performance pay translates into a $14 million taxpayer subsidy for McDonald’s.

“These fast food CEOs are a double burden on taxpayers,” said report author Sarah Anderson, the Global Economy Project Director at the Institute for Policy Studies. “They’re gorging on huge taxpayer-funded bonuses at the same time they’re fighting to keep low-level workers’ wages so low that many must rely on public assistance.”

As a solution, the report points to a bill introduced in the Senate (S. 1476) that would close the “performance pay” loophole, generating an estimated $50 billion over 10 years.

To access the full report, click here.

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The Institute for Policy Studies (IPS) is a multi-issue research center that has conducted path-breaking research on executive compensation for 20 years. The 2013 edition of their annual Executive Excess report received significant media coverage, including in the Wall Street Journal and Los Angeles Times. The May 2013 IPS report‘Fix the Debt’ CEOs Enjoy Taxpayer-Subsidized Pay was the first to put a price tag on the tax breaks specific corporations have enjoyed from the “performance pay” loophole. IPS has also produced detailed analyses of the tax and executive retirement policies of CEOs engaged in the budget debate.

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