Peter Whoriskey of the Washington Post apparently thinks he’s stumbled onto something important in Some Companies Pay Their CEOs More than Uncle Sam:
It has become a bipartisan article of faith in some quarters that the income tax on U.S. corporations must be lowered. But for many large U.S. companies, the burden of U.S. taxation pales in comparison with what they pay their chief executives, according to a study released Wednesday by the Institute of Policy Studies, a liberal think tank.
Despite what Mr. Whoriskey might think, the shareholders of these companies will surely consider it good news that the CEOs of their companies are minimizing tax expenditures. After all, there is no expenditure worse for a business than a tax expenditure.
There are two reasons for this: First, a business receives nothing of value in exchange for a tax expenditure, as it does with, say, compensation paid to a valued employee. Second, a business cannot deduct its tax expenditures which makes these capital outlays more expensive than other, alternative uses of capital.
Mr. Whoriskey has written a catchy headline, but he’s buried the lead. The real scoop here is that a CEO who is able to manage his company’s finances in such a way so as to reduce or eliminate federal income tax liabilities meets his fiduciary duty to shareholders and, by doing so, demonstrates why he is worth the compensation he receives.