https://www.washingtonpost.com/graphics/2017/business/corporations-tax-cut-gop-tax-bill/?utm_term=.9098eb549404"The Washington Post looked at what America’s 20 largest companies in the Fortune 500 say about taxes. Nearly all have vocally supported the GOP bill. Many say at least some of the extra money would probably go to shareholders via higher dividends. Other popular plans for additional cash include: looking for other companies to buy and paying down debt. Only two — AT&T and CVS — have made explicit promises to hire workers. Apple and Kroger executives have made vague statements that they would probably hire more people. Not a single company has said it will raise wages, although AT&T announced a one-time special bonus for workers after Trump signs the bill."
Of course At&T is also laying off 700 workers this week.
The article examines the 20 largest. What about all the other companies which pay corporate taxes? Heather Long, the article's author, doesn't seem to equate investment in the economy with creation of jobs and one could draw the conclusion she appears to have a preconceived notion that tax cuts are bad.
"Lots of promises to help shareholders. Two promises to hire more workers. No promises to raise wages."- her or her editor's summary at the top of the article.
Let's take a look at some of the quotes in the article:
FORD
32 percent tax rate. Plans to invest more. Ford Group Vice President of Government and Community Relations Ziad Ojakli wrote this in a letter to U.S. senators:
“[The bill] enables our critical investments in next-generation technologies like autonomy and electrification — and coupled with our provisions, like the EV [electric vehicle] tax credit, it helps support market adoption of these innovations.”
Investing in new technology creates jobs both inside and outside the Ford corporate structure.
CVS HEALTH
39 percent tax rate. Pledge to hire 3,000 more workers. CVS Health CFO David Denton said in November:
“To the degree that we have [tax] relief, there’s a lot of investments that we think we can make within our business model that can more rapidly expand our business model across the country and deliver better care and higher quality and lower cost. So we would look to take the benefit of that and invest it clearly.”
See, CVS can build more craptastic stores on every corner.
Here's Apple's stance which pretty well mirrored what I said yesterday. I don't think it will bring their manufacturing to the states because cheap Chinese labor allows them gigantic profit margins on their products but it might help create higher paying jobs in the design and corporate structure.
APPLE
25.5 percent tax rate. Vague pledge to hire more in the United States. Apple CEO Tim Cook said in November:
“I believe that tax reform is sorely needed in this country. . . . The biggest issue with corporations is that if you earn money outside the United States, which most companies increasingly will . . . the only way you can bring it into the U.S. and invest is if you pay 40 percent [tax]. This is kind of a crazy thing to do, so what do people do? They don’t bring it to the United States. . . . In my view, it should have been fixed years ago, but let’s get it done now.”
When asked by NBC’s Lester Holt whether he expected Apple to use residuals to add more jobs, Cook said:
“Yeah, I do.”
AT&T's quote about what investing $1 billion in the American economy does, it creates 7000 jobs.
AT&T
Current effective tax rate: 32.7 percent. Plans to invest $1 billion more. AT&T announced Wednesday it will give its 200,000 U.S. workers a $1,000 “special bonus” because of the tax bill, but the company stopped short of raising wages.
“AT&T is committed to invest an additional $1 billion in the United States in 2018 if a tax bill with a permanent corporate tax rate of 21 percent is signed into law. Every $1 billion in capital invested in the telecom industry domestically creates about 7,000 U.S. jobs, research shows.”
For employee shareholders in companies, there is a net benefit to them with increased dividends.
Of course there is no assurance that shareholders will treat their dividends as expendable income. Savvy investors will take increased dividends and either re-invest in more shares of the company which paid them dividends and it gives them more ability to spread that around to other companies. Wealth can either be saved or spent. Additional wealth at least gives the recipient the ability to spend that money which improves the overall economy....at least in theory.
As I said, not every tax cut is a panacea, but there are solid examples stated in the WaPo article which illustrate how a corporate tax cut can create good economic returns. It remains to be seen how the theory plays out.
