THE BLOG

Taxpayers Subsidize Restaurant Pay

04/16/2015 05:17 pm ET | Updated Jun 16, 2015

More than four million Americans work in the full service restaurant industry. Of these, nearly half rely on public assistance for their family's basic needs, according to Restaurant Opportunities Centers (ROC) United researchers. The total cost of this taxpayer-funded support amounts to more than $9.4 billion per year.

The report also breaks down the public cost of low wages at the five largest full-service restaurant corporations: Darden (owner of Olive Garden, LongHorn Steakhouse, and other chains), DineEquity (parent of IHOP and Applebees), Bloomin' Brands (Outback Steakhouse and other chains), Brinker International (Chili's Grill & Bar), and Cracker Barrel.

Because they have the largest workforce, DineEquity puts the heaviest burden on taxpayers, with employees relying on $450 million in public assistance per year, according to ROC estimates.

In addition to the subsidies resulting from the industry's low-wages, taxpayers are also subsidizing these corporations' executive compensation. Last year the Institute for Policy Studies crunched some numbers on this. Specifically, we calculated the cost of a loophole that allows corporations to deduct unlimited amounts from their income taxes for the cost of executive compensation -- as long as the pay is in the form of stock options and other so-called "performance pay." This loophole serves as a massive subsidy for excessive executive compensation.

We found that in 2012 and 2013, the CEOs of the 20 largest corporate members of the National Restaurant Association pocketed more than $662 million in fully deductible "performance pay," lowering their companies' IRS bills by an estimated $232 million. The NRA is a major opponent of raising the minimum wage, especially for tipped workers, as well as paid sick leave and fair scheduling laws.

Among full-service restaurants, the company that had enjoyed the largest CEO pay subsidy was Darden. Then-CEO Clarence Otis, Jr. took in nearly $9 million in fully deductible "performance pay" over the years 2012 and 2013. That works out to a more than $3 million taxpayer subsidy.

Otis was pushed out of the company in 2014 for -- you guessed it -- poor performance. He nevertheless sailed away with compensation and retirement funds valued at the time at $36 million.

ROC, which works to improve wages and working conditions for the nation's restaurant workforce, timed their new report to coincide with the NRA's annual lobby days in the U.S. Congress. The chair of the Ben & Jerry's corporation recently slammed the NRA for their role in perpetuating the industry's low-road model. "The National Restaurant Association and the American Hotel & Lodging Association are using every legal and political tactic in the book to block minimum wage raises from being implemented in Seattle, San Diego, Los Angeles, and other cities," Ben & Jerry's executive Jeff Furman wrote. "Instead, these trade associations should be helping businesses transition to a high-road model."

For the sake of their workers -- and for taxpayers -- let's hope they get the message.