Actually, I thought we capped that at a million dollars back in the 90s. That lead to paying them with stock options, which incentivised them to drive up stock prices, which lead to the dot.com and stock market crash.
What they call "tax breaks" are in this case writing off the cost of labor as a business expense. The corporate executives pay taxes on every dime.
If they took the money away, and paid it to every employee, the corporate tax payment would not change.
You're right. As noted by an article in Fortune, CEO pay hikes have been a product of the Law of Unintended Compensation, which holds that any attempt to reduce compensation has the perverse result of increasing it.
--In 1989, Congress tried to cap golden parachutes by imposing an excise tax on payments above 2.99 times base salary. Result: Companies made 2.99 the new minimum and covered any excise tax for execs.
--In 1992, Congress tried to shame CEOs by requiring better disclosure of their pay. Result: A window into what other CEOs were making, and a competitive game of match and exceed.
--In 1993, Congress declared that salaries over $1 million would be non-tax-exempt. Result: Companies opted for huge stock option grants and effectively adopted $1 million as the universal base compensation rate (well, the universal base compensation rate for about three or four years -- until boredom with peanuts set in).