Tax

So Far, Only 6% of Tax Savings Going to Workers

Workers aren't at the head of the line for the proceeds generated from the lower U.S. corporate tax rate, says JUST Capital.
Vincent RyanMarch 2, 2018
So Far, Only 6% of Tax Savings Going to Workers

Once 2018 began, it became the single biggest question the wider public wanted to know: How did large U.S. corporations plan to spend the windfall bestowed on them by the Tax Cuts and Jobs Act?

Two months and about 90 company announcements in, the discussion hasn’t died down. Indeed, firms like JUST Capital, a nonprofit that ranks companies “based on the issues Americans care about most,” won’t let it. JUST is closely tracking what Russell 1000 firms are pledging to do with their nearly $150 billion in found money.

What has it discovered so far?

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Workers aren’t going to be at the head of line when it comes to enjoying the proceeds generated from a lower corporate tax rate.

In an analysis released Wednesday, the firm said that only 6% of the tax-related income from the 90 companies that have made announcements is being allocated to workers. What’s more, “more than half that takes the form of one-time bonuses, as opposed to permanent raises or benefits,” the firm said in a report.

Most concerning, JUST said, is “if we assume that all proceeds not already earmarked for other uses [will] actually flow to management and shareholders in the form of stock buybacks or direct distributions, then 58% of corporate spending will be running counter to the public’s definition of what is just.”

And what is just? Worker pay and treatment that reverses a decade-long trend of wage stagnation and growing inequality, according to JUST Capital.

Most CFOs would probably argue, however, that the plans announced so far are better for “Main Street” than JUST Capital portrays.

After all, those “other uses” include 3% for communities (including charitable giving and volunteering); 7% for products improvements; and a 22% slice for “jobs” (comprised of commitment to job creation or capital investment that is “tabbed” for job-creating activities):

 

Another bright spot is the 4% of spending going to customers, which JUST categorizes as reductions in consumer rates or fees or “investments in improving the customer experience.”

For example, so far, 12 investor-owned utilities have announced they would pass on savings to their customers in the form of lower prices. According to JUST Capital, Westar Energy, Pinnacle West Capital, DTE Energy, and Alliant Energy have pledged to pass on all of their tax savings (a combined $23.1 million) to customers. Among the bigger fish, Fortune 100 company Exelon has pledged to return 93% of its $302 million in tax savings to consumers.

As regards the 6% of the total going to “workers,” some companies are doing much better than that:

 

Darden Restaurants has said it would reinvest $20 million of its $25.3 million in tax savings back into its workforce in 2018; Boeing is earmarking $100 million into workforce training and development; and FedEx is allocating $200 million in increased compensation, two-thirds of that for hourly workers.

JUSt Capital says it is tracking companies’ announcements to “incentivize companies to take more just and equitable action.” As more companies report earnings, the discussion will continue.