By Theo Francis
President Donald Trump hasn't yet signed the tax overhaul that
promises to slash corporate taxes, but several big U.S. companies
raced Wednesday to tout plans to dole out some of the expected
windfall.
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.
A few weeks ago, Mr. Stephenson was sparring with the Trump
administration after the Justice Department filed an antitrust
lawsuit to block AT&T's takeover of Time Warner Inc. He
broached the question of whether the White House meddled in the
process and said he didn't know the answer. The Justice Department
said there was no political interference.
Mr. Trump, in celebrating the bill's passage in Congress in a
White House event, highlighted AT&T's pledge to give bonuses
and increase spending. "That's because of what we did, so that's
pretty good," he said.
The mutual admiration comes after a year in which the
relationship between the White House and U.S. business leaders has
often proved tumultuous. Two CEO advisory panels disbanded earlier
this year after members began announcing they would leave the
bodies in protest of Mr. Trump's response to a white supremacist
march that turned deadly in Charlottesville, Va.
But American companies stand to benefit from the Republican tax
overhaul as well as extensive efforts to cut back regulations
across industries -- initiatives that executives have sought to
support even as they sometimes kept their distance from the
president in public.
In announcing its bonus, Comcast cited both the tax cut and the
Federal Communications Commission's recent decision to roll back
net neutrality regulations.
Economists and some policy makers have questioned the degree to
which companies will use the savings from the tax bill to invest in
the U.S. or create jobs, as opposed to buying back shares or paying
dividends to shareholders.
Congressional Democrats are highlighting the risk that companies
don't ramp up hiring and investment. Sen. Chuck Schumer (D., N.Y.)
circulated a list of more than 30 large public companies that have
announced a combined $83.7 billion in share buybacks since the
Senate passed its version of the tax overhaul in early
December.
"There is a reason so few executives have said the tax bill will
lead to more jobs, investments and higher wages," Mr. Schumer's
communications director, Matt House, wrote in an email to
reporters. "It will actually lead to share buybacks, corporate
bonuses and dividends."
Companies discussing their buybacks in conference calls during
this period didn't tie the announcements to the tax bill. Some,
including Honeywell International Inc., explicitly said they hadn't
determined how they would use foreign assets once they had paid a
one-time tax. Through Sept. 30, share buybacks have generally been
declining among S&P 500 companies since about mid-2016.
On Wednesday, AT&T said it would pay its special bonus to
more than 200,000 union and nonunion employees and front-line
managers.
The Communications Workers of America union recognized the
payouts, though it has also attacked the GOP bill as skewed toward
corporate interests and the wealthy. Labor groups have asked
corporations, including AT&T, to give employees a $4,000 wage
increase once the tax cuts pass, citing an amount the Trump
administration has said would flow to workers.
"While I'm never going to turn down money for our members,
$1,000 is a drop in the bucket," compared with companies' benefit
from the tax plan, CWA President Chris Shelton said in an
interview. "We won't rest until we get at least what they
promised."
CWA has backed the AT&T takeover of Time Warner and recently
reached a tentative labor agreement boosting pay and job
protections for about 21,000 of its wireless workers. Those
employees would get an extra $1,000 ratification bonus if they
approve the new contract.
Boeing Co., another firm expecting a big reduction in its tax
bill, said Wednesday it will inject $300 million of its savings
into employee-related activities, split equally between training,
facilities upgrades and supporting charitable gift-match
programs.
Wells Fargo plans to increase its minimum hourly wage to $15
from $13.50, a move that will affect 36,000 workers. In addition to
raising its minimum wage for 3,000 workers, Fifth Third said it
would give more than 13,500 of its 18,000 employees a one-time
$1,000 bonus.
Fifth Third finance chief Tayfun Tuzun said in early December
that he expected the bank's effective tax rate would fall from
about 26% or 27% to 12.5% or 13.5%. He also estimated that the bank
would have a net gain of $240 million to $265 million. At the time,
he expected the majority of the bank's tax benefit to go to the
bottom line. The bank said on Wednesday the pay raises would cost
$23.6 million.
--Drew FitzGerald, Rachel Louise Ensign and Christina Rexrode
contributed to this article.
(END) Dow Jones Newswires
December 20, 2017 19:41 ET (00:41 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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