Question
The top five executives of publicly traded corporations are subject to a $1 million limit each on deductible compensation. Many other highly paid individuals are
The top five executives of publicly traded corporations are subject to a $1 million limit each on deductible compensation. Many other highly paid individuals are not subject to this $1 million cap on deductibility.
Among those to whom the cap does not apply are Oprah Winfrey, who gets $225 million annually; Dr. Phil, who gets $45 million; and David Letterman, who get $40 million. Tom Cruise, Mel Gibson, and Will Smith receive $25 million for six weeks work on a film. Basketballs Kevin Garnett and Shaquille ONeal make $20 million annually. Baseballs Derek Jeter and Alex Rodriguez earn, respectively $29 million and $28 million. Even a University of Florida basketball coach makes $3 million, and a University of Alabama football coach makes $4 million.
Discuss the fairness of a tax policy that subjects the compensation of certain business executives to a limitation on deductibility by their corporate employers while allowing compensation paid to entertainers, sports stars, and others to be exempt from this limitation. Justify your answer.
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