As fast-food workers stage a one-day strike, a new report exposes how the industry’s CEOs have not just saved money by paying workers low wages, but have used the government to subsidize their own million-dollar salaries with taxpayer dollars. That is because a loophole in the tax code lets companies deduct the costs of performance-based executive pay. We are joined by Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies and author of the new report, "Fast Food CEOs Rake In Taxpayer-Subsidized Pay."
JUAN GONZÁLEZ: Across the country, fast-food workers in about 150 cities are walking off the job in their largest effort yet to push for higher wages. All of this comes as a new report exposes how fast-food CEOs have not just saved money by paying workers low wages, they’ve also used the government to subsidize their own million-dollar salaries with taxpayer dollars. That’s because a loophole in the tax code lets companies deduct the costs of performance-based executive pay.
AMY GOODMAN: For more, we go to Washington, D.C., where we’re joined by Sarah Anderson. She wrote the report, "Fast Food CEOs Rake In Taxpayer-Subsidized Pay." She’s with the Institute for Policy Studies. Sarah, how does it work?
SARAH ANDERSON: Well, this is a perverse loophole in our tax code that essentially means that the more corporations pay their CEO, the less they pay in taxes. And that’s because there is this loophole that allows companies to deduct unlimited amounts from their corporate income taxes for the expense of executive pay, as long as it’s so-called performance pay—so, stock options and other bonuses that are configured in a way to qualify for this tax loophole. And what it means essentially is that ordinary taxpayers are subsidizing excessive CEO pay.
And we looked in this report at how much the top six fast-food corporations are benefiting from this tax loophole, and it was really astounding. The most extreme example was the CEO of Yum! Brands. That’s the company that runs the KFC, Taco Bell and Pizza Hut chains. And their CEO, just in the past couple of years, has raked in $94 million of this so-called performance pay, and that translates into a tax benefit for Yum! Brands of $33 million.
AMY GOODMAN: That’s Y-U-M.
SARAH ANDERSON: Yes, again, the chain that runs KFC, Taco Bell and Pizza Hut. And I think that the point that we’re trying to raise here is to follow on to what Camille was talking about very beautifully, which is how much ordinary people have a stake in this fight around fast-food wages. As it is now, wages in that sector are so low that more than half of workers in that industry have to rely on public assistance. And I think they’ve done a beautiful job of helping people understand that point, that this low-wage model is a burden on taxpayers. And what we’re trying to add here is an understanding of how taxpayers are also subsidizing pay at the top of the corporate ladder.
JUAN GONZÁLEZ: And when you talk about the CEO of Yum! Brands, it also highlights why so many of these CEOs—why their performance pay is so much higher or bigger than their actual annual salaries in most cases. Could you talk about that, particularly, how the—the emphasis at the top levels of corporate America more on bonuses and options than on actual salary?
SARAH ANDERSON: Exactly. Yeah, well, there is a cap on the tax deductibility of executive pay at a million dollars. But that doesn’t cover the performance pay. So what they tend to do is give CEOs somewhere around a million dollars’ worth of salary and other non-performance-based pay, pay that you just get automatically, and then structure the rest of it in a way so that it can qualify for this tax deduction. It’s called performance-based pay, but there’s been a lot of research done to show that even when a CEO is performing miserably, they can still rig the rules and qualify for this performance-based compensation.
AMY GOODMAN: Earlier this year, McDonald’s offered its employees budgeting advice that actually revealed how impossible it is to make a living working for them. Its online tool provided a sample monthly budget from McDonald’s. It was based on someone working two jobs. Then, when a McDonald’s worker in Chicago called the company’s McResources, 1,800—the 1-800 number, seeking help, she was advised to seek government assistance. The worker was Nancy Salgado, a single mother, 10-year McDonald’s employee, who made the Illinois state minimum wage of $8.25. She recorded the call. This is a clip.
McDONALD’S McRESOURCE LINE: McResource Line. How can I help you?
NANCY SALGADO: Hi, I’m Nancy. I wanted more information about some help that I need.
McDONALD’S McRESOURCE LINE: I can give you a number that will be helpful. You can ask about things like food pantries. Are you on SNAP? SNAP is Supplemental Nutritional Assistance—food stamps. Do you have kids? Are you single?
NANCY SALGADO: Yeah. Yeah, I have two kids.
McDONALD’S McRESOURCE LINE: Yeah. You would most likely be eligible for SNAP benefits.
NANCY SALGADO: You know, I’m rationing food. I didn’t know about this.
McDONALD’S McRESOURCE LINE: You know, it’s a federal program. Federal money comes down to the states, and the states administer it.
NANCY SALGADO: What about, like, the doctor, if necessary?
McDONALD’S McRESOURCE LINE: Did you try to get on Medicaid?
AMY GOODMAN: After an online budgeting tool revealed McDonald’s pays its entry-level workers too little to afford essential expenses like food, water and clothing, McDonald’s CEO Don Thompson said the company does not exploit its workers.
DON THOMPSON: We have legislators and many people that will determine whether or not, you know, minimum wage should be raised. And every time, if minimum wage is raised, we have always been an above-minimum-wage employer, and we’ve always provided opportunity. For us at McDonald’s, whatever legislations comes, those will come, our franchisees, our system will abide by any of those legislations. We’re about providing opportunity.
AMY GOODMAN: There you have the CEO of McDonald’s. Sarah Anderson, your response?
SARAH ANDERSON: They’re exploiting workers, and they’re exploiting taxpayers. It is completely absurd to have highly profitable corporations steering their workers towards public assistance instead of paying them the wages that they need to make ends meet. And they’re doing it, as I said before, at both the bottom and at the top end. They’re taking taxpayer money to prop up this ridiculous business model that is based on exploiting the rest of us taxpayers. And that’s why we all have a fight in this—we all have a stake in this fight.
And for this perverse loophole that supports excessive CEO pay, there is such a simple fix for it. All we have to do is get rid of the exemption in the tax deductibility cap for executive pay for this performance pay. And there’s a bill that’s been introduced in the Senate by Senators Reed, Jack Reed, and Blumenthal. And it’s just such a no-brainer to fix this loophole that right now means that ordinary taxpayers are subsidizing the pay of people like Don Thompson at McDonald’s and David Novak at Yum! Brands, who are out there fighting to keep worker wages so low that they have to rely on public assistance.
JUAN GONZÁLEZ: And you mentioned earlier that your report cited about a half-dozen top companies. What are those other companies, so that our viewers and listeners would know?
SARAH ANDERSON: Yeah. Yeah, well, we’re just looking here at the publicly held companies that are required to report their executive pay. And so, that limited us somewhat, but the top ones are McDonald’s, Yum! Brands, Wendy’s, Dominos and Dunkin’ Brands, the ones that run Dunkin’ Donuts.
AMY GOODMAN: We’re going to end with Bill Maher on this very subject.
BILL MAHER: Due to the fact that most fast-food workers—whose average age, by the way, now is 29; I’m not talking about kids—are on some form of public assistance, which is not surprising—when even working people can’t make enough to live, they take money from the government, in the form of food stamps, school lunches, housing assistance, daycare. This is the welfare that conservatives hate. But they never stop to think, if we raise the minimum wage and force McDonald’s and Wal-Mart to pay their employees enough to eat, we, the taxpayers, wouldn’t have to pick up the slack. This is the question the right has to answer. Do you want smaller government with less handouts, or do you want a low minimum wage? Because you cannot have both. If Colonel Sanders isn’t going to pay the lady behind the counter enough to live on, then Uncle Sam has to. And I, for one, am getting a little tired of helping highly profitable companies pay their workers.
AMY GOODMAN: That’s Bill Maher. And, Sarah Anderson, we want to thank you very much for being with us, director of the Global Economy Project at the Institute for Policy Studies. We’ll link to your report, "Fast Food CEOs Rake in Taxpayer-Subsidized Pay," at democracynow.org.
When we come back from our break, Jeremy Scahill joins us. His film, Dirty Wars, has just been shortlisted for an Oscar. We’ll talk about drone attacks around the world and also the new news organization that he’s establishing with Glenn Greenwald and the founder of eBay, Pierre Omidyar. Stay with us.