Fast-food CEO's Rake in Taxpayer Subsidies

Tax Professionals' Resource
December 5, 2013 — 1,543 views  
Become a Bronze Member for monthly eNewsletter, articles, and white papers.

You might be aware of the fact that most fast-food giants save their money by paying very little to their workers. But did you know that they are also saving a lot of money by paying millions to their CEOs? All this thanks to the loophole in the tax code which has been in existence for around 20 years now. This means that it is actually the peoples’ tax payment that is covering these costs.

Most Fast-Food Companies Saving Up On Taxes

McDonald’s has saved approximately $14 million in its taxes in the last two years by using this very loophole to its benefit. This quirk in the tax code allows companies to deduct the cost of performance-based administrative pay, revealed a report given out by the Institute for Policy Studies which is a think tank.

Of course, McDonald’s is not the only one to cash on this loophole. Over a period of two years, six of the largest companies that sell fast-food have made use of this loophole. They have managed to save around $64 million of taxes, according to the report. This loophole is clearly costing the taxpayers a lot more.

Though all kinds of companies can take advantage of this performance-based pay loophole, the study exclusively focused on fast-food companies. A reading by the National Employment Law Project explained that 10 of the largest fast-food firms pay low wages to their workers. These wages are just about one dollar higher than the central minimum wages. This costs around $3.8 billion every year to the taxpayers as the workers have no option but to rely on the help from the government.

Fast-Food Companies More of A Burden On Taxpayers

Author of the report given by IPS, Sarah Anderson, is of the opinion that such fast-food companies are more of a double burden for the taxpayers. She further said that the institute is trying to bring out in open the disparity that exists between the policies of the CEO with regard to the pay of the workers versus the large subsidies that they get from their pay.

In past few months, many fast-food companies, including McDonald’s, have come under the scanner for the discrepancies between their treatment towards ‘typical’ employees and executives. Many labor organizers are expecting fast-food workers to demand a wage of a minimum of $15 per hour, or to walk off their jobs. McDonald’s also faced heat for an employee budget sample which indicated that its workers need a second job to survive.

Tax Professionals' Resource