Report: Connecticut companies, CEOs, don’t pay fair share of taxes
Correction: Jeffrey Boyd, CEO of Norwalk-based Priceline, benefited when the top income tax rate dropped from 39.6 percent to 35 percent. An earlier version of this story misstated the top U.S. income tax rate. The story has been corrected.
Washington — Travelers is among 26 large U.S. companies that paid their CEOs more than they paid in federal taxes last year, says a study by a liberal think tank.
According to the Washington, D.C.-based Institute for Policy Studies, Travelers, whose insurance operations are based in Hartford, paid no federal taxes last year. In fact, an institute study said, Travelers received a refund of $176 million from the Internal Revenue Service, even as it made $1.4 billion in global profits and paid CEO Jay Fishman more than $15.8 million.
The study also said Travelers and other large corporations, including AT&T, Boeing and Citigroup, used provisions in the tax code to pay little or nothing in taxes while their CEOs averaged $20.4 million in compensation.
Lost tax revenues hurts people who depend on public services, the institute’s study said. “These tax dollars are flowing from average Americans who depend on public services to the kingpins of America’s private sector.”
Travelers did not respond to a request for comment.
But other companies said the institute’s report is misleading because tax breaks allows them to spend more money on hiring workers and on expanding their businesses in other ways that stimulate the economy.
Nevertheless, report author Sarah Anderson said the tax code is “riddled with lots of loopholes” that allow corporations to unfairly whittle down the tax obligations and need to be closed.
Anderson said some of those “loopholes” include deductions for research and development and offshore tax havens. “The tax code needs to be looked at more closely, especially since we’re dealing with a fiscal crisis,” she said.
Anderson also argued that some of the Bush-era tax cuts that allow CEOs to pay fewer taxes should be allowed to expire at the end of the year.
Her report said 57 CEOs saved more than $1 million on their personal income tax bills last year, thanks to these Bush-era cuts.
Jeffrey Boyd, the CEO of Norwalk-based Priceline, was ranked 4th among those who benefited from the reduction of the top income tax rate from 39.6 percent to 35 percent, the Institute for Policy Studies said.
Boyd, who earned $73.5 million last year, saved $3.4 million in taxes with the Bush-era tax break, according to the study.
Priceline did not respond to a request for comment.
The institute also said CEO compensation continues to soar, even as wages for average Americans stagnate.
“CEO pay reports seem to bring a rash of predictably angry editorials and calls for reform, and this past year has added to the mix a record number of negative shareholder votes on advisory [say no on pay increase] resolutions,” the report said. “But little overall has changed. “
The Institute for Policy Studies also took aim at the taxes paid by the CEOs of some Connecticut-based hedge funds. Most of the income received by hedge fund managers is considered “earned interest” and taxed at the capital gains rate of 15 percent.
Citing a study in Forbes magazine, the institute said Ray Dalio of Westport-based Bridgewater Associates, last year’s top-earning hedge fund manager, made $3 billion. If Dalio had paid ordinary income tax rates on that money, he would have contributed an extra $450 million to the U.S. Treasury, the institute said.[Gov. Dannel P. Malloy’s administration announced last week that Bridgewater would relocate to Stamford, and receive more than $100 million in state aid for a new headquarters. The administration said New York and New Jersey had both tried to lure Bridgewater, the world’s largest hedge fund. The new facility will lead to the creation of up to 1,000 new high-level jobs in the next decade, the administration said.]
The Institute for Policy Studies also said Steve Cohen of Stamford-based SAC Capital Advisors, who earned $600 million last year, also benefited from the carried interest tax rate.
The institute said this “distorts marketplace reality.”
“Carried interest … represents payment for the delivery of a professional service — the managing of other people’s money,” the institute’s report said. “Such professional fees everywhere else in the economy face the same tax rate as ordinary wage and salary income, up to 35 percent for income in the highest tax bracket.”
Bridgewater and SAC did not respond immediately to requests for comment.
But representatives of the hedge fund industry say changing the tax code would dissuade Americans from participating in the high-risk, high-gain world of hedge fund investing — with a disastrous effect on the economy.
That argument seems to ring hollow at the White House.
President Obama wants to end the tax rate cut on high-end earners and raise the tax rate on capital gains and earned interest. However, Republicans in Congress have blocked the plan.
Sign up for CT Mirror's free daily news summary.
Free to Read. Not Free to Produce.
The Connecticut Mirror is a nonprofit newsroom. 90% of our revenue comes from people like you. If you value our reporting please consider making a donation. You'll enjoy reading CT Mirror even more knowing you helped make it happen.YES, I'LL DONATE TODAY