Fast food CEOs exploit despicable tax loophole

Fast food CEOs exploit despicable tax loophole

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A 20-year-old tax loophole netted top fast food chains an extra $64 million over the past two years, according to a new study released days before fast food workers plan the largest U.S. strike in the industry’s history.

“This is a perverse loophole that encourages excessive executive compensation …” said Sarah Anderson, who directs the Global Economy Project of the progressive Institute for Policy Studies. “Taxpayers absolutely should not be subsidizing runaway CEO pay.”

Anderson’s new IPS paper, “Fast Food CEOs Rake in Taxpayer-Subsidized Pay,” tallies the tax savings fast food corporations have reaped from “performance pay” language in federal law. Two decades ago, when Congress placed a $1 million cap on the amount of executive pay that could be tax-deductible, lawmakers created an exception for so-called performance pay. “This loophole quickly led to an explosion of ‘performance-based’ compensation, particularly stock options,” writes Anderson, which “encourages executives to carry out short-sighted, reckless actions aimed at boosting stock prices in order to inflate the value of their own options.” Rather than serving to “align the interests of executives and shareholders,” argues Anderson, instead “boards often respond to declining share prices by doling out huge new options grants with lower exercise prices” for undeserving execs. She notes that Goldman Sachs paid out 10 times as many stock options after the 2008 crash than it had the year before.