According to a new report from the Institute for Policy Studies (IPS), Walmart CEO Mike Duke took advantage of a tax loophole that saved him almost $6 million in 2011 federal income taxes.
IPS’s report sheds light on a number of ways CEO pay has spiraled out of control in recent decades.
One key reason why: Our nation’s tax code has become a powerful enabler of bloated CEO pay.
Some tax rules on the books today essentially encourage corporations to compensate their executives at unconscionably higher multiples of what their average workers are paid.
Duke benefitted from a major tax loophole: deferred compensation. Last year, he put about $17 million into a deferred compensation account. Investorplace explains, “CEOs can put an unlimited amount of their annual compensation into deferred accounts where the funds grow untaxed until drawn upon.” This is common for CEOs at large companies but is not available to the average worker. As the IPS report’s authors explain, “By contrast, ordinary taxpayers currently face strict limits on how much income they can defer from taxes via 401(k) plans. The cap maxes out at $22,000 per year for workers over 50.”
The average Walmart Associate doesn’t even make $22,000 a year, let alone have that much money to set aside for retirement in one year. On the other hand, Mike Duke was able to take advantage of this loophole to the tune of $17 million, saving him an estimated $6 million in 2011 federal income taxes. This loophole is estimated to cost taxpayers $80.6 million annually, and underscores how out of touch Mike Duke is with Walmart’s shoppers and Associates alike.