Corporate Welfare: Fast Food CEOs Cost Taxpayers $64 Million With Obscure Tax Loophole


While workers in his company’s fast-food joints get paid so little that they are forced to use $650 million worth of Medicaid every year, the CEO of the company that owns Taco Bell, KFC and Pizza Hut personally cost taxpayers about $33 million in corporate welfare.

Yum! Brands CEO David Novak (pictured, leading a corporate pep rally) raked in $94 million in so-called “performance pay” over the past two years — and more than one-third of that was subsidized by U.S. taxpayers.

In fact, using the little-discussed, two-decade-old “performance pay” tax loophole, top execs at the six major fast food corporations were showered with a combined $183 million in 2011 and 2012, costing the taxpayers $64 million.

Based on the average amount received by American families who need SNAP benefits, or food stamps, that taxpayer subsidy to the fast food bosses could have provided food assistance for 40,000 families for a year.

Basically, the loophole works like this. About 20 years ago, congress placed a $1 million limit on the amount of executive pay that qualified for a tax deduction. But under the guise of encouraging executives to do their job well, they allowed an exception for supposedly “performance-based” bonuses — stock options, for example.

So what happened? Corporations began doling out stock options to their top execs in huge quantities, costing taxpayers hundreds of millions in lost tax revenue every year.

Now a study by Sarah Anderson, of the Institute of Policy Studies’ Global Economy Project, has detailed how that loophole lets fast food execs collect whopping paychecks at taxpayer expense.

Anderson said that she concentrated solely on fast food companies because the low wages paid in that industry to rank-and-file workers who keep the actual restaurants humming are so low that they cost taxpayers about $7 billion per year in necessary public assistance to the underpaid employees.

Meanwhile, fast food CEOs feed at the public trough for their personal, yearly bonuses.

“There’s this myth out there that America is broke, and we have no choice except to slash spending on food stamps and Social Security,” Anderson told the online magazine Salon. “On the contrary, we are a very rich country. And we have too many loopholes like this that really distort our economy, and put too much of our resources into the pockets of those at the top.”

SOURCES: Salon, Institute For Policy Studies, Bill Moyers


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