With Massive Tax Breaks, Corporate Chiefs Are Behaving Like Con Men
Apple CEO Tim Cook announced this week that the company would repatriate $252 billion, give or take a few billion, then create some American jobs and invest in America – for a change.
This is a result of the massive tax cut Congressional Republicans awarded corporations like Apple that were hoarding trillions in profits overseas.
Corporate lobbyists told Congress to lower the tax rate on those overseas caches or companies like Apple wouldn’t pay a cent of the taxes they owed on those profits. Congress complied. That is highly productive corporate extortion.
As a result, Apple’s announcement that it would invest some of the repatriated profits in U.S. operations is tainted. Also sullied are the boasts by other corporations that they’ll use small parts of their annual tax savings to pay workers one-time bonuses and tiny wage increases – only to turn around and lay off thousands of workers.
The corporate extortion and maltreatment of workers defy the advice that BlackRock CEO Laurence D. Fink offered the CEOs of the world’s largest companies in a letter delivered Jan. 16. Fink’s words carry some weight since his firm is the largest investor in the world with more than $6 trillion. The letter described as flawed the CEO-favored philosophy of shareholder capitalism, under which corporations shirk responsibility to everyone but shareholders.
Fink said stakeholder capitalism, under which corporations are accountable to employees, customers and communities, as well as shareholders, is a more effective long-term strategy. “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society,” he counseled.
But CEOs at the likes of Apple, AT&T and AFLAC don’t want to hear that. These executives want their corporations to be considered people for the legal perks. But they don’t want their firms to assume humans’ citizenship obligations. These CEOs are trying to make Americans think corporations should get good citizenship awards because a handful of the nation’s 30 million employers are paying bonuses to workers from the gargantuan tax breaks that Congress gave them.
But it’s a con. The bonuses are fine, but they’re one-time events and trivial compared to the bountiful and permanent tax breaks corporations reaped from their years of lobbying Republicans.
In addition, the President’s Council of Economic Advisors said that slashing the corporate tax rate would boost the average American’s wages between $4,000 and $9,000 a year. A one-time bonus of $1,000 doesn’t get close to that.
Apple, for example, held $252 billion in profits off shore, refusing for years to pay the 35 percent corporate tax rate that would be required to return it to the United States. Now, however, Republicans in Congress have slashed the rate corporations will have to pay on overseas profits to 15 percent. Republicans also cut the rate that corporations must pay on U.S. profits to 21 percent, giving firms like Apple that moved work offshore a better deal than corporations that remained exclusively American.
It means Apple will pay only $38 billion in taxes on its overseas profits and get to keep $43 billion that it otherwise would have owed the federal government. For actual-human American citizens, as opposed to corporate-humans like Apple, that means the federal government will have $43 billion less for important services like the Children’s Health Insurance Program, opioid addiction treatment, federal school funding for special-needs children, adoption services for foster kids and workplace safety inspections.
Cook tried to sound like a Boy Scout in a statement about bringing the money home: “We have a deep sense of responsibility to give back to our country and the people who help make our success possible.” But if the corporation really had a deep sense of responsibility to the United States, it would have paid the taxes it owed and not moved all of its manufacturing off shore.
But, hey, Apple will invest its ill-gotten gains in the United States, right? Well, maybe not so much.
Apple, which had more money stashed overseas than any other American corporation, projected that its direct impact on the U.S. economy over the next five years would be more than $350 billion, but the New York Times determined, based on Apple’s past spending and projections, that its investment would be only about $37 billion more than what Apple would be expected to spend over that time in the United States. That’s good. But it’s not $350 billion in new dollars. It’s a con.
Apple says its investment will include a new headquarters and 20,000 new hires. And that’s great too. But it pales before Amazon, which had 10 percent of what Apple did overseas. Long before any tax break, Amazon’s CEO Jeff Bezos promised a second headquarters and 50,000 new high-paid positions.
BlackRock CEO Fink told Apple’s Cook and other large company CEOs this week that they have a duty to explain to investors and shareholders what they will do with the extra cash that the Republican tax break will afford them and how they’ll use it to create long-term value.
Fink, whose investment firm is looking for sustainable, enduring growth, not illusory, short-term profits, warned, “Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders. It will succumb to short-term pressures to distribute earnings, and, in the process, sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth.”
But the vast majority of executives who announced they’d share the bounty of the Republican tax breaks with their employees didn’t explain how they’d spend their windfalls or offer workers long-term value.
The conservative group Americans for Tax Reform, which supported tax breaks for the rich and corporations, compiled a list of about 125 companies that announced their workers would benefit this year from some portion of the corporate tax break.
The overwhelming majority of these are one-time bonuses. It’s true that the average worker will appreciate an extra $200 to $1,000. But none of the companies promised that $1,000 would arrive in workers’ paychecks every year, even though corporations will enjoy the tax breaks every year.
Some firms, mostly banks, said they would increase the wages of their lowest-paid workers to $15 an hour. That bank workers, responsible for the correct calculation of savings and withdraws and for safekeeping depositors’ life savings, are making starvation wages of less than $15 an hour, is frightening.
In addition, the list of financial institutions includes big ones like Wells Fargo, Capital One and PNC Financial, all of which pay their CEOs more than $12 million a year, raising the question of why those fat cats made sure they got the big bucks but never got around to paying the workers who handle the money a living wage.
Other big names that have announced one-time bonuses or pathetic wage increases are Walmart, AT&T, Comcast, Boeing and AFLAC. Again, it’s great any time additional money finds its way into the pockets of those whose labor creates corporate profits. But all of these companies were involved in a massive public relations con.
Walmart pulled the same trick. It boasted of bonuses ranging from $200 to $1,000 and raises for its lowest-paid workers to $11 an hour. That’s still not a living wage and was done only to keep up with Target, which announced in September a base wage of $11. And Walmart topped it off with layoffs. About 11,000 former Walmart workers won’t be around to get those raises.
AFLAC said it would place a one-time contribution of $500 in workers’ 401(k) accounts amid allegations in lawsuits that it lied to applicants about the pay they would receive and failed to give workers commissions they had earned.
Boeing got in on the good publicity by saying it would spend $300 billion on workers, but its workers will see no new money. Instead of raises or bonuses, Boeing will spend the money on worker training, upgrading its factories and matching workers’ donations to charities – for which, of course, it can claim another tax break.
Clearly, none of these con men CEOs actually care about their workers. Maybe, however, they will care about what activist investor BlackRock thinks. And its CEO has made it clear he believes good corporate governance takes into consideration worker, community and environmental needs.