Rules For CEO Pay: Fail by Your Own Standard, Change the Standard

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Gretchen Morgenson of The New York Times reports that the executive compensation committee of Wal-Mart has dropped same-store sales from its metric for assesing the performance of Wal-Mart CEO Michael Duke. Morgenson writes:

Why? The change was “intended to align our performance share goals more closely with our evolving business strategy, which emphasizes productive growth, leverage and returns,” Wal-Mart said.

The timing was certainly curious. The switch came amid a sustained decline in Wal-Mart’s same-store sales, which have been falling for nearly two years. The company’s total sales, however, rose 3.4 percent in the latest fiscal year.

Shifting the goal posts meant more money for Mr. Duke in the latest fiscal year than he would have received under the old arrangement. His compensation totaled $18.7 million, more than $16 million of which was performance-based.

Changing the rules of the game to make sure that CEO compensation keeps growing is why CEO pay has balloned relative to compensation in the rest of the economy.

Third and State This Week: Big Budget Rally, Mexican Trade Deficit & Marcellus Shale Taxes

This week, we weighed in on a debate over the tax payments of drillers in Pennsylvania. We also blogged about the state's revenue surplus, a big rally at the State Capitol and the Pennsylvania jobs toll of a trade deficit with Mexico.

IN CASE YOU MISSED IT:

  • On the Marcellus Shale, Sharon Ward responds to a Pennsylvania Department of Revenue analysis of the tax contributions of the oil and gas industry. Michael Wood writes about comments made by Revenue Secretary Dan Meuser in The Pittsburgh Post-Gazette on the issue of whether gas drillers are structuring their businesses as pass-through entities to cut their state tax bills.
  • On state budget and taxes, Chris Lilienthal shares a short video from this week's Rally for a Responsible Budget which brought more than 5,000 Pennsylvanians to the State Capitol. Michael Wood writes that better-than-expected revenue collections in April have pushed Pennsylvania's General Fund revenue surplus to over $500 million.
  • Finally, on trade issues and jobs, Stephen Herzenberg blogs about the findings of a new Economic Policy Institute report on the U.S. trade deficit with Mexico. In Pennsylvania, that deficit has cost us more than 26,000 jobs since 1994.

More blog posts next week. Keep us bookmarked and join the conversation!

Drillers Likely Morphing Into Pass-Through Entities to Cut Taxes, Revenue Secretary Says

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Interesting tidbit from a Tuesday Pittsburgh Post-Gazette interview with Revenue Secretary Dan Meuser.

The article highlighted an analysis from the Department of Revenue on the state taxes being paid by oil and gas drillers and related companies. Toward the end of the story, Post-Gazette reporter Laura Olson writes:

The department's figures show 275 companies paying corporate taxes in 2006, a number that dropped to 178 last year and to 97 so far this year. [Secretary Meuser] attributed the general decline to fluctuation as mergers occur, noting that this year's number is expected to rise slightly.

But the secretary also said some companies, in light of the state's 9.99 percent corporate tax rate, were probably morphing from corporations to become pass-through entities taxed at the lower 3.07 percent [personal income tax] rate. He said that was speculation and that the department didn't have definitive data on those transitions.

"Consolidation clearly is the primary reason" for fewer drilling companies paying corporate taxes, he said. "But the other is also occurring. That's exactly why the governor wants to lower the corporate rate."

This is a point we've been making all along. At last count, more than 80% of permitted wells in the Marcellus Shale are owned by companies that are operating as limited liability companies (LLCs) or limited partnerships (LPs). Individuals who own a share in these entities pay the personal income tax rate on profits, avoiding the corporate net income tax. This lowers the company's effective tax rate.

Mexican Trade Deficit Costs Pa. 26,000 Jobs Since 1994

Our friends at the Economic Policy Institute have a new report tracking the number of lost or displaced jobs as a result of the United State's trade deficit with Mexico.

In 1993, before the North American Free Trade Agreement (NAFTA) took effect, the U.S. had a $1.6 billion trade surplus with Mexico, which supported 29,400 U.S. jobs. Since then, imports from Mexico have grown much faster than U.S. exports, resulting in large trade deficits that have displaced 682,900 jobs nationwide since 1994. The trade deficit with Mexico currently totals $97.2 billion.

For Pennsylvania, this trade deficit has cost us more than 26,000 jobs since 1994. That puts us in eighth place among the 50 states in the raw number of jobs displaced and 20th as a share of total employment.

Crowd of Thousands Rally for a Responsible State Budget

A crowd of thousands rallied on the steps of the Pennsylvania Capitol Tuesday to call on lawmakers and the Governor to enact a responsible state budget — one that closes tax loopholes and ends special tax breaks before making deep cuts to schools, colleges, prekindergarten, health care and services for victims of abuse.

Revenue Analysis Goes Well Beyond Taxes Paid by Drillers

Last week, the Pennsylvania Budget and Policy Center released a report outlining the favorable tax treatment enjoyed by the natural gas industry in Pennsylvania. The report was intended to provide an understanding of the actual taxes paid by the companies that would be directly impacted by a drilling tax.

Federal incentives cut the state and federal tax bills of drillers, and unlike in most energy-rich states, oil and gas reserves are exempt from property taxes in Pennsylvania. The report cited Department of Revenue data showing that oil and gas drillers paid only $38.8 million in state business taxes in 2008.

This week, the Pennsylvania Department of Revenue is out with its own analysis claiming that the drilling industry is paying a lot more than that. But as I explained in a media statement today:

The Department of Revenue’s new analysis makes an apples to oranges comparison of the taxes paid by companies engaged in natural gas drilling.

Strong April Puts Pennsylvania's Fiscal Surplus at $506 Million

In some very good news for Pennsylvania’s budget, the Commonwealth saw its fiscal-year surplus grow to $506 million last month.

Better-than-expected collections in April – the second largest revenue month of the year – will likely position the Commonwealth to end the 2010-11 fiscal year with a significant surplus. This could offset some of the deep cuts to K-12 education, colleges, health care and human services that were proposed in the Governor’s 2011-12 budget.

Third and State This Week: Zombies, Millionaire Taxes and Gas Drillers

This week, we blogged about New Jersey's millionaire tax, taxes and Marcellus Shale drillers, zombies and much more. 

IN CASE YOU MISSED IT:

  • On state budget and taxes, Steve Herzenberg explains that a millionaire tax didn't chase the rich out of New Jersey. In light of that, Steve writes, Pennsylvania should consider enacting a higher tax rate on unearned income, which would mostly impact top earners in Pennsylvania. Kate Atkins, meanwhile, posts a short video of a Berks County rally for a better state budget.
  • On the Marcellus Shale, Sharon Ward invites each natural gas drilling company in Pennsylvania to release details on the state and local business taxes it pays. And Chris Lilienthal shares concerns about Senate President Pro Tempore Joe Scarnati's proposed local impact fee on Marcellus Shale drillers.
  • Finally, Mark Price fights zombies who believe that only the rich pay taxes.

More blog posts next week. Keep us bookmarked and join the conversation!

Advocates Call for Better Budget at Reading Rally

About 100 Reading area residents rallied outside the Berks County Services Center Wednesday to call on lawmakers to close tax loopholes and end special tax breaks before making deep cuts to schools, colleges, and services for people with disabilities.

The event, sponsored by Better Choices for Pennsylvania and the CLEAR Coalition, featured Mike Morrill of Keystone Progress as emcee. Keystone Progress put together a short video to highlight the best parts of the event.

Concerns Raised About Sen. Scarnati's Local Impact Fee

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Senate President Pro Tempore Joe Scarnati today unveiled his long-awaited proposal to enact a local impact fee on Marcellus Shale gas drillers in Pennsylvania.

The Pennsylvania Budget and Policy Center was among a group of advocates to raise some concerns about the plan. While we give Senator Scarnati credit for taking a step forward on this important issue, the plan lets drillers off the hook too easily and provides little to no benefit for most Pennsylvanians.

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