Average U.S. taxpayers subsidize executive compensation by more than $20 billion per year, thanks to various tax and accounting loopholes, according to a new report.

The report, by the Institute of Policy Studies, cited preferential capital gains treatment of carried interest as one leading subsidy, which it estimated at an annual cost of $2.661 billion to taxpayers. Unlimited deferred compensation amounts to $80.6 million in taxpayer subsidies, according to the group. Offshore deferred compensation costs taxpayers $2.06 billion, unlimited tax deductibility of executive pay amounts to $5.25 billion, while stock option accounting costs a whopping $10 billion.

The group cited IRS research showing that corporations claimed 2005 stock option tax deductions that were collectively $61 billion larger than the expenses shown on the company books.

The study also noted the outsize salaries of the CEOs of beleaguered mortgage giants Fannie Mae and Freddie Mac and criticized the loose restrictions on salaries in the recently passed housing bailout package. "The bill created a new regulator for the two mortgage firms and gives this regulator the authority to limit or withhold 'golden parachutes' and to ensure that executive pay levels are 'reasonable,'" said the report. "But the legislation does not define 'reasonable,' a decision that allows regulators considerable latitude."

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