Tax Cuts Already Trickling Down With Bonuses And Pay Raises

Yen Hoang 12/23/17

Tax Reform Benefits

In celebration of the tax bill that was passed by The House and Senate on Wednesday, a handful of large companies have taken the opportunity to announce higher wages and more bonuses. The Republican tax bill reduces the corporate tax rate from 35% to 21% whilst allowing a one-time repatriation of overseas cash. Companies plan on sharing their proceeds with their employees and spending more money on infrastructure.

         The first company to announce their new spending policies was Boeing. The company released a statement, which announced "immediate commitments for an additional $300 million in investments that will move forward as a result of the new tax law." Regarding the new reforms, Dennis Muilenburg, CEO of Boeing, said, "For Boeing, the reforms enable us to better compete on the world stage and give us a stronger foundation for the investment in innovation, facilities and skills that will support our long-term growth.” The new commitments that Boeing announced are "$100 million for corporate giving, with funds used to support demand for employee gift-match programs and for investments in Boeing's focus areas for charitable giving: in education, in our communities, and for veterans and military personnel”, ”$100 million for workforce development in the form of training, education, and other capabilities development to meet the scale needed for rapidly evolving technologies and expanding markets”, and “$100 million for "workplace of the future" facilities and infrastructure enhancements for Boeing employees.”

         Boeing was followed by AT&T, which announced that after the tax bill comes into effect, it will pay a $1,000 bonus to more than 200,000 US employees. An AT&T press release stated: “Once tax reform is signed into law, AT&T plans to invest an additional $1 billion in the United States in 2018 and pay a special $1,000 bonus to more than 200,000 AT&T US employees — all union-represented, non-management and front-line managers. If the president signs the bill before Christmas, employees will receive the bonus over the holidays." President Trump called the plan “pretty good”.

         3,000 hourly employees of Fifth Third Bancorp will also benefit from the new tax bill with Fifth Third Bancorp pledging to raise its minimum hourly wage to $15 for all employees. The bank also announced that it would give out a one-time bonus of approximately $1,000 to 75% of its employees. Greg Carmichael, Fifth Third President, and CEO said, “We want to invest in our most important asset – our people. Our employees drive our reputation, our business and our success." Wells Fargo is another bank that said that it would also raise its minimum wage to $15 an hour. The bank also announced that it plans to donate $400 million to community and nonprofit organizations in 2018 and will target 2% of its after-tax profits for corporate philanthropy beginning in 2019. Comcast also announced that it would award $1,000 special bonuses to more than 100,000 eligible frontline and non-executive employees following tax reform and the repeal of net neutrality. Brian Roberts, CEO, additionally pledged to spend $50 billion over the next five years investing in infrastructure.

         For Republican lawmakers, the announcements are a joy to hear as they have been fighting for corporate tax cuts in order to help out American workers; that sentiment seems to be shared by the majority of people. According to Dick Bove, a banking analyst at Vertical Group, "This is exciting stuff. This is good. This is not just a whole bunch of guys saying I can buy back a lot of stock here and jazz up my numbers through financial engineering. This is a bunch of business leaders saying we can use this tax benefit to grow our company, keep our loyal employees and assist the community.” The announcements are widely seen as a positive step for companies who are enjoying a lower tax rate.

         Yet despite all of the people who are benefiting from the outcomes of the GOP tax bill, the Democrats have still somehow managed to find something to complain about. Schumer criticized AT&T’s announcement by saying that they have been paying a lower tax rate for a while. Others cynically claim that some of the companies would have eventually been forced to raise their wages anyway and that the announcements were just a good PR strategy. Regardless of the opinions, at the end of the day, American workers are about to benefit greatly from the GOP tax bill, and that is what matters.

         The passage of this bill provides President Trump and the rest of the GOP with a rather necessary momentum going into the new year, a momentum that might prove to be useful going into the 2018 midterm elections. Republicans needed just this type of landmark legislation after a tumultuous year of the party failing to unify on the repealing of Obamacare. Regardless of all the rhetoric floating around, the newly passed legislation will face its true test once Americans are directly affected by it in the coming year.

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