Tag Archives: Corporate Tax

News

Fifth Third Bank gives employees raises and bonuses ahead of Trump’s tax cut bill

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Why does the United States have the highest corporate tax rate in the world?
Why does the United States have the highest corporate tax rate in the world?

What happens when you cut the corporate tax? Well, government gets less of what businesses earn, which means less money for sugar subsidies and AMTRAK and settle Congressional sexual-harassment lawsuits. And what do businesses do with that extra money they get to keep? Well, they could create new products, make existing products cheaper, improve existing products, improve their existing products… lots of good things. In a competitive free market, business have to use their capital to develop better and cheaper products that customers will want to freely buy.

CNBC reports on one of my favorite corporations – Fifth Third Bank – reacting to news of an impending cut in the corporate tax rate.

Excerpt:

Fifth Third Bancorp will pay more than 13,500 employees a bonus and raise the minimum wage of its workforce to $15 an hour after the passage of the Republican tax plan that will cut the bank’s corporate tax rate.

[…]Cincinnati-based Fifth Third, the fifteenth largest U.S. bank by asset size, said the tax cut allowed it to re-evaluate its employee pay and pass along some of the windfall. Nearly 3,000 workers will see hourly wages rise to $15. The $1,000 one-time bonus is expected to be paid by the end of this year, the bank said, assuming President Donald Trump signs the bill into law by Christmas.

Senior managers and top executives are excluded from the special payments. “It is good for our communities, employees and Fifth Third Bank,” said CEO Greg Carmichael in a statement.

But, Fifth Third wasn’t the only company making decisions that favored their employees.

Fox Business reported on some others – and notice how the bonuses are going to non-management and non-executive workers:

AT&T

The telecom giant said Wednesday that more than 200,000 of its employees, including union-represented and non-management workers, will be eligible for a $1,000 bonus. The checks will be in the mail in time for the holidays if Trump finalizes the tax bill with his signature before Christmas. AT&T (T) also said it will invest $1 billion more than expected in the U.S. in 2018, once the cuts are final.

“Congress, working closely with the President, took a monumental step to bring taxes paid by U.S. businesses in line with the rest of the industrialized world,” AT&T Chairman and CEO Randall Stephenson said in a statement. “This tax reform will drive economic growth and create good-paying jobs.”

Boeing

The aerospace and defense company immediately announced $300 million in investments after the bill passed, with $100 million toward corporate giving including employee gift-match programs, $100 million toward workforce development, training and education and $100 million toward enhancing Boeing’s workplaces.

“On behalf of all of our stakeholders, we applaud and thank Congress and the administration for their leadership in seizing this opportunity to unleash economic energy in the United States,” Boeing (BA) President and CEO Dennis Muilenburg said in a statement. “It’s the single-most important thing we can do to drive innovation, support quality jobs and accelerate capital investment in our country.”

Comcast

The Philadelphia-based telecom corporation said it would award $1,000 bonuses to more than 100,000 non-executive employees. In addition, Comcast (CMCSA) NBC Universal Chairman and CEO Brian L. Roberts said the company plans to spend more than $50 billion in the next five years on infrastructure investments that are expected to create “thousands of new direct and indirect jobs.”

In a press release, Comcast said the initiatives were “based on the passage of tax reform and the FCC’s action on broadband.”

The way that economics works is that when you give tax cuts to the people who create products and services, they use that money to try to develop better products and services. We all benefit from having innovative products that make us more efficient and productive. Laptops, smartphones, wireless routers, GPS all give us the potential to be more productive. But the only way to develop and sell these products is to hire people who are focused on pleasing customers.

But when you give government money, they turn to the most dependent segments of the population (e.g. – non-English-speaking refugees from countries dominated by Islamic terrorism), and they offer to buy their votes by giving them free stuff. Free drug-injection clinics. Free contraceptives. Free abortions. Free sex changes. Free welfare for refugees and illegal immigrants. We need to let private sector job creators keep their own money because they pay workers who have to get up and go to work.

News

American corporations are expanding outside the United States to avoid high taxes

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From Investors Business Daily.

Excerpt:

Walgreen, America’s venerable drug-store chain, is thinking the unthinkable: relocating to Europe. Not because it sees growth and opportunity there, but because of onerous taxes here in the U.S. It’s an ominous trend.

The Financial Times of London calls it “one of the largest tax inversions ever.” That is, a company seeking to avoid punitive taxes in one market by moving to another.

No doubt the FT is right. And after its recent $16 billion takeover of Swiss-based Alliance Boots, it would be easy for Walgreen to remake itself as a Swiss company.

If it did, the Democratic Party’s liberals would no doubt call Walgreen unpatriotic for wanting to lessen its tax burden. In fact, they are responsible for an economic environment so hostile to capital and investment that companies now find it intolerable.

[…]According to an analysis by UBS, Walgreen’s U.S. tax rate is 37.5% — compared with Alliance Boots’ rate in Europe of about 20%. That’s a huge gap, worth billions of dollars a year.

But it’s even worse than that. A recent OECD study says the “integrated tax rate” — taxes on capital and income — for U.S. companies is a nightmarish 67.8% vs. 43.7% for the OECD.

Many companies facing steep tax rates and insane regulations in the U.S. have had enough. They’re keeping their profits overseas. Last week, Senate Finance Committee chief Ron Wyden, an Oregon Democrat, reported U.S. corporations now hold $2.1 trillion in earnings in overseas accounts — a massive amount, roughly equal to 12% of U.S. gross domestic product.

A total of 547 companies — including Apple, GE, Microsoft and Pfizer — have dramatically expanded their so-called foreign indefinitely reinvested earnings overseas, which let them avoid the punishing rates here at home.

[…]Not only are taxes too high, but also new laws such as Dodd-Frank and ObamaCare, a vast expansion of regulation, debt and the size of government, the federal takeover of entire industries, the bullying of Wall Street and demonization of CEOs, and forced CO2 cuts that will hammer manufacturers have made this the least pro-free market U.S. government in generations.

If you make it harder for businesses here to do business (higher taxes and burdensome regulations), then they will expand abroad instead, and in some cases, they will just move completely. How does that help create jobs here? It doesn’t.

News

Why do corporations ship jobs overseas? What causes outsourcing of jobs?

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World Corporate Tax Rates
World Corporate Tax Rates

Here is a news story from Yahoo News that explains the problem and the cause of the problem. (H/T Dad)

Excerpt:

Large U.S. companies boosted their offshore earnings by 15 percent last year to a record $1.9 trillion, avoiding hefty tax bills by keeping the profits abroad, according to a new report.

The overseas earnings stockpile has climbed by 70 percent over the past five years, said research firm Audit Analytics. Data in its report covers the Russell 3000 index of the largest U.S. corporations.

U.S.-based multinationals do not have to pay U.S. corporate income tax on foreign earnings as long as the earnings do not enter the United States. Accounting rules also let the companies avoid recognizing a tax expense if management intends to keep the earnings indefinitely reinvested overseas.

“It would probably be nice to have this money in our country being used in our economy, but at the moment we see it growing elsewhere,” said Don Whalen, general counsel and director of research at Audit Analytics.

Conglomerate General Electric Co (GE.N), had the most indefinitely reinvested overseas earnings, at about $108 billion, while drugmaker Pfizer Inc (PFE.N) was next with $73 billion, according to Audit Analytics.

The simple answer is that Americans believe that corporations need to pay high taxes and operate under burdensome regulations. This eats into their profits, making it harder for them to grow and expand. The plain truth is that it is easier for corporations to expand and hire in countries with lower taxes and fewer regulations. Besides, who wants to be wiped out by a nuisance lawsuit just because someone spills coffee on themselves and then refuses to take responsibility? The smart play is to just opt out completely, and that’s what many corporations do – earning higher profits in more business-friendly countries.