Corporations move to share some of their gains from tax cut

  • 22 December 2017
  • NormanL
Corporations move to share some of their gains from tax cut

There have been many questions about what corporations will do with the new provisions in the tax reform bill that reduce corporate rates, and create incentives for them to bring the billions of dollars they have parked overseas back to the United States. A few companies made clear they intend to give their workers a boost:

AT&T Inc. and Comcast Corp. said they would pay a $1,000 bonus to most of their U.S. workers—more than 300,000 people combined—once the president signs the legislation. Wells Fargo & Co. and Fifth Third Bancorp said they would raise their minimum wage to $15 an hour.

The moves came within hours of a final vote in the House to adopt the legislation, which would reduce the corporate tax rate to 21% from 35% and make other sweeping changes expected to cost $1.5 trillion over the next decade. The Senate passed the bill a day earlier, and Mr. Trump is expected to sign it, though perhaps not until early January.

Telecoms and banks are among those expected to get a huge boost from the overhaul since most of their operations are domestic and they pay higher effective rates than internet or pharmaceutical firms that have intellectual property or operations outside the country.

In a statement, AT&T CEO Randall Stephenson was effusive in his praise for the bill, saying Congress and Mr. Trump “took a monumental step” to align U.S. taxes with those of other industrialized countries.

While many other corporations have not yet decided what they will do with their potential gains, and it is widely assumed that shareholders will also benefit (be it through higher dividends or share repurchases...good news for those holding stocks in their retirement accounts), the early moves on bonuses and wages create a public relations incentive for other companies to follow suit. We will have to wait and see whether they do so.

But we suspect more will follow the early movers' example...because good PR is good for business.