Trickle-down economics, or cheap PR?
Such is the online debate in the wake of the largest reorganization of the tax code in 30 years.
Some high-profile corporations are crowing that they will be sharing a portion of the additional revenue with employees as a sign of good faith and a promise to more heavily invest in the U.S.
Not everyone is buying that line, however.
AT&T announced it would be investing more capital domestically and giving workers a $1,000 bonus.
“By immediately lowering the corporate tax rate to 20%, this bill will stimulate investment, job creation and economic growth in the United States,” said Randall Stephenson, AT&T Chairman and CEO.
“With a rate of 20% combined with provisions for full expensing of capital expenditures for the next five years, we’re prepared to increase our investment in the United States. If the House bill is signed into law, we’d commit to increase our domestic investment by $1 billion in the first year in which the new rates are in place. And research tells us that every $1 billion in capital invested in telecom creates about 7,000 good jobs for the middle class.
On Twitter, the skeptics were out in force.
Yes, it is commendable that AT&T is giving its employees a $1,000 bonus. But it’s $200 million, for a company that had $13 billion in profit last year. Or, put another way, it didn’t need tax cut to do it. This is PR.
— Dan Primack (@danprimack) December 20, 2017
Some noted that companies offering bonuses were not offering a permanent wage increase:
Bravo to giving a greater share of profits to employees…but this smacks of a political gesture. If AT&T truly was passing along the benefits of a tax cut to workers, they would give a *permanent* increase to wages. Haven’t seen any company do that yet.https://t.co/rR28CoDQ21
— Laszlo Bock (@LaszloBock) December 21, 2017
In an op-ed for Bloomberg, Brooke Sutherland wrote:
By now, companies have learned the art of crafting the type of upbeat, largely symbolic press releases our president loves, with enough big numbers to get them on the White House’s good side. If this time around that also means some extra money in workers’ pockets, all the better. But some of these announcements come across as more gimmicky than others, and it’s not hard to wonder if there are also other motives at work.
Some compared the anticipated corporate profits against the small fraction they were offering workers:
Goldman estimated that the tax cut would increase Wells Fargo’s profits by $3.7 billion next year. So they’re basically tithing. https://t.co/5Rf19doa6O
— Binyamin Appelbaum (@BCAppelbaum) December 20, 2017
AT&T was the first to announce its plans to pass along some of the gravy to workers, but other companies have also announced their plans to give employees more in compensation, with a $1,000 bonus being the most popular offering.
Comcast announced Wednesday that it would award one-time $1,000 bonuses to more than 100,000 employees, which would include frontline and non-executive employees.
The Communication Workers of America, the union that represents many of those frontline workers, had demanded that employers guarantee the yearly $4,000 household wage increase that Republican lawmakers asserted would be the outcome of the tax cut.
Wells Fargo and Fifth Third Bank announced wage increases to $15 an hour, and Chicago-based airliner Boeing said it would commit $300 million to charity and employee development, according to a Axios report.
Fifth Third tweeted about its plans to raise wages:
— Fifth Third Bank (@FifthThird) December 20, 2017
Boeing applauded the tax reform bill with a tweet:
— The Boeing Company (@Boeing) December 20, 2017
The moves seem to be largely motivated to combat the narrative that tax reform would only result in more money for shareholders. CNBC had reported on Wells Fargo’s plan to give any excess capital back to investors.
At an investor presentation earlier this month, when asked about how regulatory rollbacks might impact those plans, Wells Fargo CEO Tim Sloan said higher returns for investors were in the cards.
“Is it our goal to increase return to our shareholders and do we have an excess amount of capital? The answer to both is, yes,” Sloan said. “So our expectation should be that we will continue to increase our dividend and our share buybacks next year and the year after that and the year after that.”
How can companies show they are earnest in passing along this windfall, Ragan/PR Daily readers?