Top U.S. Banks Paid $2 Bn in Deductible Bonuses in 4 Years (WFC, AXP)
A study has found that the top 20 banks in the U.S. paid out $2 billion in fully deductible performance bonuses to their top 5 executives between 2012 and 2015. At a 35 percent corporate tax rate, this amounted to a taxpayer subsidy of more than $725 million.
The report published by left-wing think tank Institute for Policy Studies claims that financial institutions took advantage of a loophole in the 1993 Clinton administration reform that caps tax deductibility of employee compensation at $1 million by giving out stock options and cash bonuses as performance-based pay to their executives. Activist Robert Reich, who was the Secretary of Labor at the time, said on his official Facebook page, “Secretary of the Treasury (Lloyd Bentsen) and head of the National Economic Council (Bob Rubin) insisted pay should be deductible if linked to corporate performance. I argued against their loophole. They outvoted me. Their recommendation went to Clinton, and the rest is history. From then on, executive stock bonuses soared.” (See also CEO Pay Packages at Top 5 U.S. Banks)
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