Over 160 companies have announced that they are either giving bonuses to their employees, raising their wages or otherwise sharing the benefits that the companies will realize from the GOP’s tax overhaul package passed last month. But Democratic House Minority Leader Nancy Pelosi has called the announcements “crumbs.”
“I would hope that with their big advantage of bringing money home at a very low rate that they would invest in infrastructure and things, but our experience has been that they will do dividends, do stock buybacks, and things like that. I think it’s insignificant,” Pelosi said of the companies.
She began by calling the bonuses pathetic compared to the benefits that the corporations themselves are receiving. “In terms of the bonus that corporate America received versus the crumbs that they are giving workers to kind of put the schmooze on is so pathetic. It’s so pathetic,” Pelosi said.
It may be difficult to calculate the exact value of what a bonus, or increased job security may mean to an hourly or salaried worker. But calculating what the gestures represent as a percentage of what the corporations are in line to receive may be somewhat helpful in terms of putting into perspective the relative value of the bonuses the companies have announced.
Americans for Tax Reform (ATR) is keeping a helpful list of the number of companies that have announced bonuses or other financial benefits to their employees as a result of the GOP tax plan. ITN picked three companies at random and did some back of the envelope math on just what the benefits they announced would mean for the companies that announced them.
American Airlines announced it will be giving $1,000 bonuses to each of its 127,600 employees, excluding their corporate officers. That amounts to about $127 million. Now, American Airlines does not actually pay taxes because of “enormous” losses the company has incurred in the past. But if we look at the revenue that the company made in 2016, the last year for which financial data is available, we find that it’s roughly $6.2 billion.
The corporate tax rate was 35%, under the old law. But even if we take the lower, and much more favorable, in terms of comparison, number of 28%, (which is widely believed to what U.S. corporations actually pay), and assume, for the moment, that they make the same revenue this year, we find that if American Airlines were to pay taxes this year, they would be paying about $434 million less than they did last year. The amount that they are paying out in bonuses this year, $127 million, is roughly 29% of what they are saving in taxes under the new tax rates. And that’s just for one year.
The next company we analyzed was Bank of America. Bank of America reported income before taxes in 2016 of roughly $25.1 billion. The company had an effective tax rate of 28.8%. Under the new legislation they will be saving almost $2 billion in taxes. The company announced that it would be giving $1,000 bonuses to each of its 145,000 employees, a total payout of $145 million, or 7% of what it will save in taxes this year.
Boeing plans on giving $100 million in charitable donations, $100 million for workforce development and $100 million for infrastructure and facilities. Boeing had an effective tax rate of 12.1% in 2016 because of tax benefits realized that year related to what it says is the settlement of 2011-2012 federal tax audits, so 2016 isn’t the best year to use for comparison.
But if we use the numbers for 2015, a year much more representative of Boeing’s tax situation, we see that their earnings before taxes that year were about $7.1 billion, and they paid an effective tax rate of 27.7%. With the same revenue and the new tax rate, Boeing would be saving about $476 million. The $300 million that they plan to pay out represents about 63% of what they would be saving this year. Again, that’s just for one year.
This is not to minimize the gestures that these companies are making. In real dollar terms, these outlays are significant. But if the point of tax reform is to spur hiring and, ultimately, wage growth, it remains to be seen whether those goals are going to be achieved. So far, a majority of the companies’ announcements have been for one-time bonuses or other benefits, such as increased 401(k) contributions. Much fewer companies have announced the permanent hiring of new employees.