Saturday, November 21, 2015

Include executive compensation in corporate tax stories

Whenever reporters write of corporate executives' complaints about  high corporate taxes, editors should require them to include the executives’ annual compensation…just to put things in perspective.

One of the biggest  “taxes” around comes through exorbitant executive compensation. The big salaries and benefits tax shareholders and ultimately middle-class taxpayers.

How happy these executives are to boost our taxes to pay for their compensation. Those taxes have gone up and up and up as executives are paid more.

Executive compensation is a business tax write-off. In short, Lithia’s taxes to the state are lower as  it pays its executives more.

And the higher the write-off and executive compensation, the more we taxpayers pay to make up for it.

On today’s Oregonian front page, we have one John North, the chief financial officer of Ashland-based Lithia Moters, complaining that a proposed higher state corporate tax would drive Lithia and other "low margin" businesses out of the state. That, of course, would cost jobs here etc.

In the same story, we have Ken Thrasher, a former Fred Meyer CEO, quoted to similar effect. Groceries are also considered "low-margin."

Question: What is Mr. Thrashers, retirement package from Fred Meyer? What is it compared to that of a checker at Fred Meyer? What does the current CEO at Fred Meyer make? Could Freddie's margins be made less "low" if executives were paid less?

Question: What is Mr. North’s own salary, particularly compared to those who work on the floor or the backshops in Lithia’s dealerships. What is the compensation for Mr. North’s own boss and other top executives?

Part of the solution to the tax-revenue problem is that executive compensation above a set amount shouldn’t be allowed as a tax write off. In that way, corporate taxes would be “raised” and shareholders would presumably benefit.

Or if corporations still want the compensation write off, they should compensate workers more, in part addressing the pressing problem of gross pay inequity in corporate America.

A ratio of executive salary to the pay of the average worker could be set in law. Something like five-to-one. Nationally, the ratio now is something like 300 to 1.

Suppose the average worker at Lithia makes $50,000. Under a new law, Mr. North and others in the executive suite would not be able to make more than $250,000.

With their financial know-how, executives should manage to get by on that.

Could you? Could I?

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