What Kind of Taxes Do Top Company Execs Pay? From Tesla, Amazon, Walmart — and Beyond
Though 2020 was a difficult time for many, the country’s 614 billionaires added nearly $1 trillion in new wealth–$931 billion, to be exact–to their personal fortunes in just seven months starting in mid-March when the pandemic became an emergency.
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Not surprisingly, the thousands and thousands of people who those executives employ experienced a much different reality in 2020–and they’ll have a much different experience during tax season, as well.
As readers will see, executive compensation packages are complicated webs of securities, incentives, salaries, bonuses, stocks, options, ownership stakes, company control, and good, old-fashioned cash. Nailing down exactly what they pay in taxes isn’t easy, but the following examination looks at what the top executives earn, what they pay in taxes, and how that compares to their employees.
Elon Musk and Tesla Employees
In what Bloomberg called “probably the fastest bout of wealth creation in history,” Elon Musk added $165 billion to his personal fortune in roughly the last year alone. On Jan. 7, that astonishing run culminated in what until recently would have been written off as impossible. That day, the South Africa-born engineer passed Amazon’s Jeff Bezos to take the title of the richest human being in the world as Musk’s net worth approached $195 billion.
The mountain of cash was generated by the meteoric rise of Tesla, whose stock has soared 23,900 percent since its 2010 IPO–including a five-for-one split–and 743 percent in the last year alone. Musk is living proof of just how complex high-level CEO compensation packages–and their tax implications–can be. Musk received $2.3 billion in stock options from Tesla in 2018, but he actually earned $0 in total compensation. That’s because pay packages can be structured to satisfy SEC reporting requirements without considering the actual value of what an executive really receives. Had that money been taxed at a rate of 37% in the highest tax bracket like standard W2 salary, Musk would have paid about $851 million in taxes.
An engineering manager at Tesla makes an average of $160,295 per year. Presuming Musk’s employee filed jointly with a spouse, that engineer would pay $32,251 for tax year 2020.
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Douglas McMillon and Walmart Employees
In 2020, Walmart CEO Douglas McMillon received total compensation of $20.9 million, which actually represents a pay cut–McMillon earned $22.1 million the year prior. Landing him squarely in the 37% tax bracket, that’s a tax bill of nearly $8.18 million if he files individually–sort of. Just $1.3 million of his total compensation is in base salary. The vast majority of the rest–$15.7 million–comes from stock awards with everything else coming from non-equity incentives. All that, of course, is taxed differently than straight-up income.
McMillion’s giant compensation package is 983 times the size of the $22,484 annual salary earned by the median Walmart worker. That median worker falls in the 12 percent tax bracket and in 2020, he or she would have paid $2,733 in federal income tax plus FICA.
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Mary Barra and General Motors Employees
Mary Barra, CEO of General Motors, earned total compensation of $21.33 million in 2020, roughly the same package that made her the highest-paid CEO of the Detroit 3 in 2019. Presuming she filed jointly, that’s a hefty $7.9 million tax bill. Like the other big corporate execs, however, the money took a convoluted route from its source to Barra’s checking account. Her total cash payment was $4.83 million, with $2.1 million in base pay and the rest in bonuses. Another $15.67 million comes from equity compensation–$12.14 million from stocks and the rest from options. More than $831,000 in income is classified as “other.“
An assembly line worker at General Motors earns an average of $41,126. In 2020, that shift worker’s tax obligation would have been $6,396 for federal income taxes and FICA.
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Mark Zuckerberg and Facebook Employees
Facebook’s Mark Zuckerberg is one of the most under-compensated CEOs in America–actually, he’s one of the worst-paid employees of any rank. He gets $0 in stock, options, and other equity compensation, $0 in bonuses, and his annual salary is just $1. There is, of course, the little thing of $23,415,972 in “other” compensation, which accounts for all but $1 of his total $23,415,973 2020 pay package. If “other” income is taxed like regular income at Zuckerberg’s 37% tax rate, he’d be stuck with a bill from Uncle Sam for $8.51 million.
A software engineer at Facebook makes about $160,000 a year. If that engineer is married filing jointly, the employee would pay $32,181 in federal income tax plus FICA for tax year 2020.
Jeff Bezos and Amazon Employees
Jeff Bezos earned a salary of $81,840 in 2019, the same salary he’s earned at the company since the dawn of e-commerce in 1998. When total “other” compensation is included, Bezos cleared $1.68 million, which has also been his total compensation for the last several years at least. If he made the same amount in 2020 and filed as an individual taxpayer, his tax bill would be $595,340 for federal income taxes plus FICA.
The median full-time worker salary at Amazon is $36,640. If filing as a single taxpayer, that median Amazon worker would pay $5,514 in federal income tax plus FICA.
The Standard Deduction Is a Big Part of Savings
The 2017 Tax Cuts and Jobs Act made two big changes to the tax code that are still being felt today. The tax brackets were changed so that most people pay a smaller percentage of their income. But the change that probably had a bigger impact was the huge increase in the standard deduction, which jumped from $6,350 to $12,000 and from $12,700 to $24,000 for single and joint filers, respectively.
The standard deduction is the amount you can subtract from your income before you calculate what you owe, which reduces your taxable income and ultimately, your tax bill. In 2020, the standard deduction increased to $12,400 for individuals and $24,800 for joint filers. All taxpayers must choose between the standard deduction and itemized deductions–which can now be unlimited–and should pick whichever option reduces their taxable income the most.
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Karen Doyle contributed to the reporting for this article.
Last updated: Mar. 18, 2021
This article originally appeared on GOBankingRates.com: What Kind of Taxes Do Top Company Execs Pay? From Tesla, Amazon, Walmart — and Beyond
