The Incidence Of Corporate Tax Breaks In The U.S.

A 17%-25% share of the benefit that publicly held corporations receive from corporate tax breaks goes towards compensation for their five highest paid executives.

I analyze the effect of two corporate tax breaks, bonus depreciation and the Domestic Production Activities Deduction (DPAD), on executive compensation in publicly traded US firms. I find both tax breaks significantly increase executive compensation. For every dollar a firm benefits from the tax breaks, compensation of the firm's top five highest-paid executives increases by $0.17 to $0.25. The tax breaks increase compensation primarily in firms with weaker governance structures, suggesting the compensation response is driven by executive rent extraction.

Eric Ohrn, "Corporate Tax Breaks and Executive Compensation" American Economic Journal: Economic Policy 215-255 (August 2023).