Corporate Federal Income Tax Subsidy: The subsidy calculation subtracts the current federal taxes a company actually pays for the years studied from the 35% statutory corporate income tax rate for those years. The statutory federal corporate income tax rate is 35% of U.S. pre-tax earnings (the amount companies would pay if there were no deductions, credits or loopholes). The tax subsidy calculation was pioneered by Citizens for Tax Justice and a more detailed explanation can be found on page 6 of CTJ’s report, Corporate Taxpayers and Corporate Tax Dodgers.
Corporate income tax data comes from 10-K annual reports filed by the companies with the U.S. Securities and Exchange Commission and available on the SEC website. Corporate tax rates are calculated by dividing the current federal income taxes by the U.S. pre-tax income as reported in the tax footnote of the 10-K. Current taxes represent the company’s best estimate of taxes they will owe during the year, and does not include deferred taxes, which may be paid in future years.
Teacher Salary: Cost is $55,418 a year. National Education Association, Rankings of the States 2012 and Estimates of School Statistics 2013, NEA Research, February 2013. No web link available.
Immunizations: Cost is $870 for the immunizations a child receives in the first 12 months of life. The figure is based on this immunization schedule from the U.S. Centers for Disease Control and the costs of the drugs found at this CDC website.
Head Start: Cost is $7,584 per enrollee. National Education Association calculations and data from the U.S. Department of Health & Human Services’ Office of Head Start. No web link available.
Medicaid: Cost is $6,775 per enrollee. See p. 13, Table 2, U.S. Center for Medicare and Medicaid Services.
First Responders: Cost is $46,663, which is the average of the wages for three types of first responders – Emergency Medical Technicians and Paramedics ($34,370; Occupation Code 29-2041), firefighters ($47,850; Occupation Code 33-2011) and police officers ($57,770; Occupation Code 33-3050). The wages are for May 2012 from the U.S. Bureau of Labor Statistics.
Corporate Tax Rates: All corporate tax data comes from 10-K annual reports filed by the companies with the U.S. Securities and Exchange Commission (SEC) and available on the SEC website. Corporate tax rates are calculated by dividing the current federal income taxes by the U.S. pre-tax income as reported in the tax footnote of the 10-K. Current taxes represent the company’s best estimate of taxes they will owe during the year, and does not include deferred taxes, which may be paid in future years. The tax rate calculations for some companies (e.g., Honeywell) take into account the tax effect of stock-option based compensation, which were not used in analyzing other company’s tax rates.
Offshore Untaxed Income: If companies have untaxed offshore income, it will also be noted in the tax footnote to their 10-K report, usually with reference to offshore earnings that are “permanently reinvested” and for which no reserve for taxes owed has been made. Some companies report the U.S. taxes they have avoided by keeping their profits offshore. These offshore profits may be taxed in the host country, but they are not taxed in the United States until they are brought back (repatriated).
Foreign Subsidiaries: Companies list all of their subsidiaries and the country (or state) they are registered in Exhibit 21 of their 10-K report.
Tax Haven Subsidiaries: We use the most recent Government Accountability Office list of tax-haven countries, available on p. 12 of this report, Large U.S. Corporations and Federal Contractors with Subsidiaries in Jurisdictions Listed as Tax Havens or Financial Privacy Jurisdictions.
Corporate Tax Subsidy: This concept was pioneered by Citizens for Tax Justice, a non-partisan organization providing cutting-edge research on the taxes U.S. corporations pay and don’t pay. The tax subsidy is simply the value of the total deductions, credits and loopholes offered corporations in the tax code. To calculate corporate tax subsidy, we took 35% of U.S. pre-tax earnings (the amount companies would pay if there were no deductions, credits or loopholes) and subtracted the current federal taxes a company estimates it will pay during the year. More explanation is on page 6 of CTJ’s report, Corporate Taxpayers and Corporate Tax Dodgers.
Corporations report the number of their employees in the “Business” section located at the beginning of their annual 10-K report. Most companies provide data only on their global workforce, though some also report on the number of U.S. employees. In presenting figures on job destruction or creation we adjust for the impact of major acquisitions or divestitures.
Total Compensation: Total compensation numbers come from the Summary Compensation Table found in the company’s annual proxy statement (SEC Form DEF-14A) found on the SECs website.
Total Retirement Assets: Retirement benefits for the companies’ top five officers are also reported in their proxy statement. Executive pension assets are reported in a table labeled “Pension Benefits” (usually the fourth table after the Summary Compensation Table). Deferred Compensation retirement benefits are found in a table entitled “Non-Qualified Deferred Compensation,” which usually immediately follows the pension table. Pension benefits plus deferred compensation benefits equals total executive retirement assets.
Expected Monthly Retirement for CEOs: To calculate the expected monthly retirement check for CEOs we entered their total retirement assets into an annuity calculator found at www.immediateannuities.com. To use the calculator, we used state=New York and age=65 for all calculations. The number we report as expected monthly retirement benefit is based on a single beneficiary annuity. All values were calculated on March 22, 2013, and will change thereafter based on changes in interest rates.
CEO Pay Deduction: In 1993 Congress attempted to pass a law limiting the tax deduction companies could take for executive pay to $1 million per executive per year. But as the law neared passage a giant loophole was slipped in, allowing all pay deemed to be “performance based” to be exempted from the $1 million limit. As a result, stock-based pay exploded and with it, overall executive pay. To calculate the value of this loophole for corporations, we took the value of stock options exercised from the “Options Exercised and Stock Vested” table of the proxy statement (generally the third table after the Summary Compensation Table) and the non-equity incentive awards from the Summary Compensation Table, as both of these are generally deemed performance-based. In some cases, bonuses and restricted stock vested are also deemed performance-based if these are based on annual performance goals and the plans are voted on by shareholders. In performing these calculations we collected data for the four highest-paid officers, excluding the chief financial officer. These are the named officers covered in the pay deductibility law. The total of this “performance-based pay” is multiplied by the corporate marginal tax rate of 35% to determine the value of reported tax savings.