Some U.S. firms paid more to CEOs than taxes: study (Reuters)

WASHINGTON (Reuters) – Twenty-five of the 100 highest paid U.S. CEOs earned more last year than their companies paid in federal income tax, a pay study by a Washington think tank said on Wednesday.

At a time when lawmakers are facing tough choices in a quest to slash the national debt, the Institute for Policy Studies, a left-leaning group, said it also found many of the companies spent more on lobbying than they did on taxes.

The senior Democrat on the House of Representatives oversight committee, Elijah Cummings, called for hearings on executive compensation "to examine the extent to which the problems in CEO compensation that led to the economic crisis continue to exist today."

Several companies mentioned in the report took issue with its methodology and said they paid all taxes owed.

General Electric spokesman Andrew Williams called the study "inaccurate" and noted it did not include significant income taxes paid in 2010 for previous years, or state taxes paid. "GE pays what it owes," he wrote in an e-mail response to questions.

Boeing spokesman Chaz Bickers said the study is "simply wrong".

Instead of Boeing's reported "U.S. federal current tax expense" of $13 million which the IPS used, he said a better approximation of the company's taxes paid would be the $360 million it reported as its net income tax payments, most of which, he says, was federal.

"On federal cash tax payments last year we paid in the hundreds of millions," Bickers told Reuters. The company also received a $371 million credit from the government last year for overpayment of taxes in the past, and has added 5,000 U.S. jobs this year Bickers says, in part because of Federal tax breaks.

The institute compared CEO pay to current U.S. taxes paid, excluding foreign and state and local taxes that may have been paid, as well as deferred taxes which can often be far larger than current taxes paid.

The group's rationale was that U.S. taxes paid are the closest approximation in public documents to what companies may have actually written a check for last year. It said deferred taxes may or may not be paid.

The accounting used in SEC filings differs from the accounting used to tally what's owed on a corporate tax return. Neither the IPS number nor the figure cited by Boeing exactly equals the check written to the IRS, says Scott Dyreng, an assistant professor at Duke's Fuqua School of Business who studies corporate taxes, and though companies could disclose that figure, don't have to and don't do so.

$16.7 MILLION AVERAGE

Compensation for the 25 CEOs with pay surpassing corporate taxes averaged $16.7 million, according to the study, compared to a $10.8 million average for S&P 500 CEOs. Among the companies topping the IPS list:

* eBay whose CEO John Donahoe made $12.4 million, but which reported a $131 million refund on its 2010 current U.S. taxes.

* Boeing, which paid CEO Jim McNerney $13.8 million, sent in $13 million in federal income taxes, and spent $20.8 million on lobbying and campaign spending

* General Electric where CEO Jeff Immelt earned $15.2 million in 2010, while the company got a $3.3 billion federal refund and invested $41.8 million in its own lobbying and political campaigns.

Though the companies come from different industries, their tax breaks fall into two primary areas.

Two-thirds of the firms studied kept their taxes low by utilizing offshore subsidiaries in tax havens such as Bermuda, Singapore and Luxembourg. The remaining companies benefited from accelerated depreciation.

Shareholders have responded favorably when companies in which they invest keep a tax bill low through legal methods, thereby benefiting earnings. But Chuck Collins, an IPS senior scholar and co-author of the report, said that is a mistake.

"I think it's an exposure of weakness in a company if their profitability is dependent on their accounting department and not on making better widgets," he said.

In prior reports, Collins said, out-sized CEO pay was often a red flag of bigger problems to come. The IPS has been putting a pay report together for 18 years. Among those whose leaders have made the high pay list in years past, only to have their businesses falter: Tyco, Enron and WorldCom.

(Reporting by Nanette Byrnes; Editing by Howard Goller, Todd Eastham and Jackie Frank)

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Some flyers may not see savings from expired taxes (AP)

DALLAS – Some airline customers won't see savings this weekend even though several federal taxes on tickets have expired.

US Airways and American Airlines raised fares to offset the tax savings.

That means instead of passing along the savings from expired taxes, the carriers are pocketing the money while customers pay the same amount as before.

But other airlines left their prices unchanged on Saturday. Consumers could save money by shopping around.

The expired taxes can total $25 or more on a typical $300 round-trip ticket. For a September trip between Dallas and San Francisco, the cheapest American flight on Travelocity.com was $24 higher than offerings from United, Continental, Delta and Virgin America, which did not raise fares.

The taxes expired after midnight Friday night when Congress failed to pass legislation to keep the Federal Aviation Administration running.

That gave airlines a choice: They could do nothing — and pass the savings to customers — or they could grab some of the money themselves.

"We adjusted prices so the bottom-line price of a ticket remains the same as it was before ... expiration of federal excise taxes," said American spokesman Tim Smith. US Airways spokesman John McDonald said much the same thing — passengers will pay the same amount for a ticket as they did before the taxes expired.

Smith declined to say whether the increase would be rescinded if Congress revives the travel taxes.

Tom Parsons, who runs the Bestfares.com travel website, said consumers should get a break.

"Why would the airlines deserve it?" he said. "They already hit us with enough fees. Now they're keeping the government fees too."

The Transportation Department says it will lose $200 million a week. J.P. Morgan analyst Jamie Baker said airlines could take in an extra $25 million a day by raising fares during the tax holiday.

Parsons said competitive pressure eventually will force the airlines to match — either they'll all pass the tax savings on to passengers, or they'll all raise fares and keep the money themselves.

Southwest Airlines and its AirTran subsidiary raised prices by $8 per round trip, said spokeswoman Marilee McInnis.

Southwest's support could be crucial if the airlines decide to keep the tax money. Southwest carries more U.S. passengers than anyone, and it effectively sets rates on many routes. Southwest torpedoed attempts by other airlines to raise prices in the last two weeks. CEO Gary Kelly has publicly worried that airlines could frighten away passengers by raising prices too high.

That may be less of a fear this time, however, since consumers wouldn't be shelling out more money for tickets — they just wouldn't get an unexpected discount, courtesy of Congress.

Several federal travel taxes expired when Congress adjourned for the weekend without passing FAA legislation. Lawmakers couldn't break a stalemate over a Republican proposal to make it harder for airline and railroad workers to unionize.

Air traffic controllers stayed on the job, but thousands of other FAA employees were likely to be furloughed.

Airlines stopped collecting a 7.5 percent ticket tax, a separate excise tax of $3.70 per takeoff and landing, and other fees. Those add up to about $32 on a round-trip itinerary with base fare of $240 and one stop in each direction.

Other government fees for security and local airport projects are still being collected. They boost the final cost of that $240 base-fare ticket to $300.

Passengers who bought tickets before this weekend but travel during the FAA shutdown could be entitled to a refund of the taxes that they paid, said Treasury Department spokeswoman Sandra Salstrom. She said it's unclear whether the government can keep taxes for travel at a time when it doesn't have authority to collect the money.

___

AP Airlines Writer Joshua Freed in Minneapolis contributed to this report.

Follow David Koenig at http://www.twitter.com/airlinewriter

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Taxes still a stumbling block in debt talks (Reuters)

WASHINGTON (Reuters) – After months of effort, President Barack Obama and congressional Republicans are right back where they started as they try to avert a looming debt default: arguing over taxes.

With a "grand bargain" to tame the national debt seemingly off the table, Obama, House of Representatives Speaker John Boehner and other leaders will try for a more modest deal when they resume discussions at the White House Monday afternoon.

But negotiators will have to confront a divide over taxes that has prevented them from reaching a deal so far. Democrats say new tax revenues need to be part of the equation, while Republicans say they won't back any increase in taxes.

A highly anticipated Sunday meeting broke little new ground. Obama and his fellow Democrats repeated the need for a "balanced" approach, while Republicans restated their position that tax increases would further burden the already shaky economy. Senate Democratic Leader Harry Reid lectured Republicans for backing away from tough decisions, sources said, while Boehner was largely silent.

A source familiar with the meeting described it as a "frank exchange of views" -- Washington-speak for "acrimonious."

The post-meeting rhetoric seemed to bear this out.

"It's baffling that the President and his party continue to insist on massive tax hikes in the middle of a jobs crisis," said Don Stewart, a spokesman for Senate Republican Leader Mitch McConnell.

Reid's spokesman, Adam Jentleson, said: "The stakes are too high for Republicans to keep taking the easy way out."

Time is running short to break the impasse.

The Treasury Department has warned that it will run out of money to cover the country's bills if Congress does not raise the $14.3 trillion debt limit by August 2. Failure to do so could push the country back into recession, send shock waves through global markets and threaten the dollar's reserve status.

The real deadline is even closer. Participants say a deal should be in place July 22 to ensure Congress has time to act. Obama told lawmakers to be ready to meet every day this week.

But Senator Jim DeMint, a Republican aligned with the fiscally conservative Tea Party movement, said the threat of default was overblown.

"We're not going to default. We've got enough tax revenue to pay our bills," DeMint told NBC's "Today Show" on Monday.

"We don't need to panic and rush into a deal," he added.

If White House talks produce no plan this week, DeMint said Republicans would introduce a bill to raise the debt ceiling in exchange for "reasonable" spending cuts, caps and movement toward a balanced budget amendment.

TAXES SCUTTLE 'GRAND BARGAIN' AND SMALLER DEAL

Aides to Boehner and Obama had spent much of the past week discussing an ambitious budget deal that would have reformed the tax code and popular social spending programs and scaled back annual defense and domestic spending.

The goal was the $4 trillion in budget savings, measured over 10 years, that budget experts say is needed to keep the national debt at a sustainable level.

Obama wanted between $1.3 trillion and $1.7 trillion of that total to come from new tax revenue, according to a Republican source. That would have come in part by allowing the current lowered tax rate for the highest earners to rise back to its 1990s levels in 2013, while keeping the lower rates in place for middle- and low-income earners.

Republicans felt that what Democrats offered in return -- a promise to lower tax rates across the board while closing a range of tax breaks -- was not enough.

On Sunday, Obama and other Democrats pressed for the "grand bargain" but Republicans said they wanted a smaller deal.

With savings of around $2 trillion, that would cover the nation's borrowing needs through the November 2012 elections.

Many elements of that deal have already been hammered out in talks led by Vice President Joe Biden, but taxes proved to be a stumbling block in those sessions as well.

Representative Eric Cantor, the No. 2 House Republican, walked out June 23 after Democrats insisted on closing $400 billion worth of tax breaks that largely benefit the wealthy.

There could be a way out.

Last week, Cantor said he could support closing some tax breaks if they were offset with tax cuts elsewhere.

Democrats have proposed a range of tax cuts to boost the economy, including an extension of the current payroll tax cut and a permanent credit for research and development costs.

That approach would allow both sides to declare victory -- Republicans would get a deal that doesn't raise taxes overall, and Democrats could say they raised taxes on the rich and helped bring down the 9.2 percent unemployment rate.

(Additional reporting by David Morgan; Editing by Eric Beech)

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Republicans firm on taxes ahead of Obama meeting (Reuters)

WASHINGTON (Reuters) – The Senate's top two Republicans on Sunday stood firm against including tax increases in any deal to raise the debt limit and shrink budget deficits one day before a meeting with President Barack Obama, but said the showdown need not go down to the "11th hour."

Obama is to meet separately with Senate Democratic and Republican leaders on Monday to try to revive negotiations that collapsed on Thursday when Republicans walked out over Democrats' demands for tax increases.

Sending a message to Obama in appearances on Sunday news interview shows, Senate Republican leader Mitch McConnell and Jon Kyl, his deputy in the leadership, presented a unified front demanding spending cuts and opposing tax hikes.

"We have a spending problem. We don't have a problem because we tax too little," McConnell said on the ABC program "This Week."

"We need to quit borrowing, quit spending, and get us our trajectory heading in the right direction. Throwing more tax revenue into the mix is simply not going to produce a desirable result, and it won't pass," McConnell added.

Obama said on Saturday he remained committed to working with Congress to solve the government's debt problem, but the focus could not be only on spending cuts, as Republicans demand.

The $14.3 trillion U.S. debt ceiling must be raised before August 2 or the Treasury Department will run out of money to pay the nation's bills. A default on debt payments could send markets plunging globally and raise the risk of another U.S. recession.

"One of the reasons we are meeting tomorrow (Monday) is that I think both the Democrats and the Republicans would like to come together and finish this negotiation and finish it sometime soon. It need not necessarily go to the 11th hour," McConnell said.

"We need to put something together that will actually pass and make a difference, impress Standard & Poor's and Moody's and the rating agencies that are about to downgrade the U.S. credit rating for the first time in our history," he added.

'KILL THE ECONOMY'

The U.S. federal deficit stands at $1.4 trillion, among the highest levels relative to the economy since World War Two.

Speaking on "Fox News Sunday," Kyl said "we have to try" to get a deal by August 2.

"I think the president has to make a decision -- which is more important to him: solving this problem, reducing spending somewhat, or making sure that we raise taxes on American economy?" Kyl said.

"If you want to kill the economy, raise taxes. Are we going to vote to absolutely put another anchor around the neck of the economy, which is struggling to try to recover here? Absolutely not. It's terrible policy," Kyl added.

Democrats have eased back from their insistence that personal income tax rates need to rise on the wealthiest Americans to focus instead on ending a wide range of tax breaks on everything from corporate jets to oil and gas subsidies.

They have also proposed closing tax breaks that benefit the wealthy, such as limiting the deductions for households making more than $500,000 a year.

Republicans control the House of Representatives while the Democrats control the Senate.

Appearing on CNN's "State of the Union" program, House Minority Leader Nancy Pelosi said Democrats must have a say in crafting an agreement, especially if Republicans in the chamber cannot generate enough support on their own to pass a final plan.

Pelosi said any package that only cuts spending is unworkable, suggesting that closing what she and other Democrats call corporate "tax subsidies" for oil companies and other businesses should be included in any deal.

"You cannot achieve what you set out to do if you say it's just about cutting. It has to be about increasing the revenue stream as well. There are many things you can do in terms of special interest loopholes," Pelosi said.

Republican Senator Jim DeMint, a favorite of the conservative Tea Party movement advocating deep spending cuts, said he believes the United States would not default on its obligations if Congress fails to raise the debt ceiling.

"If we add another $2 trillion to our debt without taking control of it, I think you're going to see the markets respond in a much worse way," DeMint said on CNN.

(Reporting by John Crawley, Paul Simao, Paul Eckert and Lucia Mutikani; Writing by Will Dunham; Editing by Vicki Allen)

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Top Republicans insist no taxes in debt deal (Reuters)

WASHINGTON (Reuters) – President Barack Obama will hold separate talks with Senate Democratic and Republican leaders on Monday to try to resurrect stalled negotiations aimed at raising the U.S. debt limit and avoiding default.

Obama will meet on Monday morning with Senate Democratic leader Harry Reid and in the early evening that day with Senate Republican leader Mitch McConnell.

Talks fell apart on Thursday when Republicans walked out over Democrats' demands for tax increases as part of a deficit reduction plan. A deal must be reached by August 2 to avoid a potential default on the country's $14.3 trillion debt.

The top Republicans in Congress, McConnell and U.S. House of Representatives Speaker John Boehner, held fast on Friday to their position that Congress would not accept any tax increases. Boehner said Obama must come to the negotiating table next week with deep spending cuts if he wants a deal.

"The president and his party may want a debt limit increase that includes tax hikes, but such a proposal cannot pass the House," Boehner said in a statement.

The $14.3 trillion U.S. debt ceiling must be increased before August 2 or the Treasury Department will run out of money to pay the country's bills. A default on debt payments could send markets plunging around the world and raise the risk of another U.S. recession.

Boehner said if Obama offers up spending cuts that are at least the size of a debt limit increase -- thought to be around $2 trillion to $2.5 trillion -- and if new budget reforms are put in place, "He has my word that the House will act on it."

These are requirements Boehner and fellow Republican leaders have been voicing for months.

Representative Chris Van Hollen, one of the Democrats who was involved in the failed talks led by Vice President Joe Biden, told Reuters: "What they're saying (Republicans) is 'we have to have everything our way.'"

"They don't want to get rid of tax breaks for oil and gas companies. They don't want to get rid of tax breaks for corporate jets, they don't want to ask the wealthiest Americans to give up some of their tax preferences and they'd rather put the economy at risk" by creating uncertainty over the U.S. credit rating, Van Hollen said.

The Washington Post reported Democrats were seeking about $400 billion in new tax revenues on companies and the wealthy.

"There's not any particular number on the revenue package but we have discussed ... the idea of phasing out some of the tax preferences for very high income individuals, over half a million dollars" as well as ending some corporate tax breaks," Van Hollen said.

(Editing by Jackie Frank)

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Debt talks collapse, Republicans walk out over taxes (Reuters)

WASHINGTON (Reuters) – U.S. budget talks collapsed on Thursday after Republican negotiators walked out, throwing doubt on Washington's ability to reach a deal that would allow the government to keep borrowing and avoid a debt default.
Representative Eric Cantor, the No. 2 Republican in the House of Representatives, said participants had identified trillions of dollars in potential spending cuts but were deadlocked over tax increases sought by Democrats. Republican Senator Jon Kyl also pulled out, according to an aide.
"Regardless of the progress that has been made, the tax issue must be resolved before discussions can continue," Cantor said in a statement.
House Speaker John Boehner, the top Republican in Washington, said Democrats must take tax hikes off the table.
"These conversations could continue if they take the tax hikes out of the conversation," Boehner said.
Negotiators had hoped to reach a budget deal by next week that would give lawmakers political cover to raise the $14.3 trillion debt ceiling before the Treasury Department runs out of money to pay the country's bills.
Default could occur if Congress does not act by August 2, pushing the United States back into recession and sending markets plunging around the globe.
So far, that possibility hasn't affected bond markets as investors focus on other news and assume that Washington will ultimately strike a deal. But that probably won't come until the last minute, analysts said.
The talks are "not dead but they are on life support," said Greg Valliere, a political analyst for investors at Potomac Research Group. "This is going to look ugly for the next few weeks."
DEAL NOT NECESSARILY OUT OF REACH
Vice President Joe Biden was still scheduled to come to Capitol Hill on Thursday, where he will meet with fellow Democrats now that the two Republican members of his deficit-cutting group have dropped out.
The breakdown in talks does not mean that a deal is out of reach. Participants had expected Boehner and President Barack Obama to handle the final negotiations -- a step that now may occur sooner than anticipated.
Cantor had given little indication that the talks had hit a wall. After Wednesday's session, he said he looked forward to talks on Thursday and Friday and indicated that the group was making progress.
"Obviously if we weren't, we wouldn't be meeting again," he told reporters.
His withdrawal caught Democrats by surprise, coming as Obama met with House Democratic leaders at the White House before the afternoon's negotiating session.
"Until our Republican colleagues are more concerned about our need to reduce the deficit than what Grover Norquist has to say, we will have a difficult time," said Democratic Representative Chris Van Hollen, referring to a prominent anti-tax activist.
Republicans have said from the outset that any tax increases will not pass the House. But Democrats thought wiggle room might be possible after Senate Republicans voted to close a tax break for ethanol last week, defying Norquist and other anti-tax activists.
In recent sessions, Democrats have pressed to close a wide range of tax breaks, from oil and gas subsidies to breaks that benefit wealthy individuals. Negotiators had reached tentative agreement on cuts to health benefits, annual spending, other benefits like farm subsidies and tuition aid, and automatic limits on future spending, according to an aide familiar with the discussions. But Democrats would not relent on taxes, the aide said.
REPUBLICANS MAY NOT HAVE THE VOTES
Republicans may not have enough votes to pass a deal through the House in any case, as many newly elected conservatives feel little urge to compromise.
That means Boehner may have to rely on Democratic votes, and Democrats will insist that tax increases must be part of the deal, one lawmaker said.
"I think we walk away unless there's some revenue raisers," Democratic Representative Allyson Schwartz said at a breakfast event hosted by Third Way, a centrist think tank. "It is going to take a bipartisan effort to get this done. That's something Republicans need to realize and we're not there yet."
The decision to leave the talks may be an effort to buy some breathing room from his right flank, one analyst said.
"One can hope Cantor, by leaving the talks, is just trying to shore up his reputation with the hotheads in the House before actually coming to an agreement," said Cary Leahey, managing director of Decision Economics in New York.
Cantor and Boehner may need to allow a debt-ceiling vote to fail before they can craft a compromise, budget expert Stan Collender said. That could provide a jolt to markets akin to the failed bank bailout vote of 2008, which caused the Dow Jones Industrial Average to drop 800 points.
"There may need to be a negative market reaction to that vote to get Republicans to move from their current position," said Collender, a budget analyst with Qorvis Communications.
One Democratic aide said Cantor recognizes that tax increases will have to ultimately be part of any deal but that he did not want to be the one to say so.
"Cantor just threw Boehner under the bus," the aide said.
(Additional reporting by Kim Dixon and Donna Smith in Washington and Ellen Freilich in New York; editing by Jackie Frank)
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