As the election season kicks into high gear, the U.S.'s budget and, specifically, the country's hefty deficit, is a central, hotly contested issue.
While I tend to steer clear of stepping onto political third rails in my writing, Reuters' coverage of the Institute for Policy Studies' recent study on CEO pay caught my eye. Titled "Executive Excess 2012: The CEO Hands in Uncle Sam's Pocket," the IPS' study looks at a handful of public-company CEOs whose paychecks are larger than what their companies pay in taxes. The list included drugmaker Abbott Labs
The report is a controversial one for sure -- Reuters quoted Abbott spokesman Scott Stoffel as saying it was "a blatant misrepresentation of the facts." But while the tax-to-CEO pay comparison is eye-catching, I was particularly struck by what Reuters said about megabank Citigroup
A Citigroup spokeswoman said that, while the company did not pay federal income tax in 2011, that was due to substantial losses it recorded in 2008 and 2009, a break available to all businesses in similar straits. ... She also noted that Citi paid on average $3.7 billion a year in federal income taxes from 2000 to 2006...
In fact if we look at total taxes paid (a different approach than IPS took), Citigroup paid around $3 billion in taxes over the past 12 months. That compares to nearly $8 billion in taxes paid in 2006 and more than $9 billion paid in 2005. AIG
Between just two companies, that's a swing of $27 billion in total taxes between 2005 and this past year.
And Citi and AIG are hardly alone. In 2006, Bank of America
This isn't a novel point -- my fellow Fool Morgan Housel has done a great job breaking down the reasons for the deficit and put falling tax revenue front and center. But as we hear the rhetoric cranking up on both sides around our country's deficit, it's not always what seems most obvious that's at the root of the problem.
Less tax, more profit?
As for Bank of America, a lower tax burden may be good for the bottom line, but investors need to consider a lot more before investing in this banking behemoth. To get the lowdown on exactly what you need to consider when weighing B of A as an investment, check out The Motley Fool's premium special report, "Will Bank of America Break Your Portfolio?"
The Motley Fool owns shares of Abbott Laboratories, Citigroup, Bank of America, JPMorgan Chase, and Chesapeake Energy. Motley Fool newsletter services have recommended buying shares of American International Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
Fool contributor Matt Koppenheffer owns shares of Bank of America and Abbott Labs, but does not have a financial interest in any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.
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