“The arithmetic for us is simple,” AT&T’s chief executive, Randall Stephenson, said on CNBC
in May. If Congress were to cut the 35 percent tax on corporate profits
to 20 percent, he declared, “I know exactly what AT&T would do —
we’d invest more” in the United States.
Every
$1 billion in tax savings would create 7,000 well-paying jobs, Mr.
Stephenson went on to say. The correlation between lower corporate taxes
and more jobs, he assured viewers, runs “very, very tight.”
As
Congress prepares to take up tax legislation this fall, including an
effort to reduce the corporate tax rate, this bold jobs claim merits
examination. Notably, it comes from the chief executive of a company
that’s already paying comparatively little in federal taxes.
According to the Institute on Taxation and Economic Policy,
AT&T enjoyed an effective tax rate of just 8 percent between 2008
and 2015, despite recording a profit in the United States each year, by
exploiting tax breaks and loopholes. (The company argues that it pays
significant taxes, at a rate close to 34 percent in recent years, but
that includes deferred taxes and state and local levies.)
Despite
the enormous savings AT&T has realized, the company has been
downsizing. Although it hires thousands of people a year, the company,
by our analysis at the Institute for Policy Studies, reduced its total
work force by nearly 80,000 jobs between 2008 and 2016, accounting for
acquisitions and spinoffs each involving more than 2,000 workers.
The company has also spent $34 billion repurchasing its own stock since 2008, according to our institute report,
a maneuver that artificially inflates the value of a company’s shares.
This is money that could have gone toward research and development or
hiring.
Companies
buy back their stock for various reasons — to take advantage of
undervaluation, to reward stockholders by increasing the value of their
shares or to make the company look more attractive to investors. And
there is another reason. Because most executive compensation these days
is based on stock value, higher share prices can raise the compensation
of chief executives and other top company officials.
Since 2008, Mr. Stephenson has cashed in $124 million in stock options and grants.
Many
other large American corporations have also been playing the tax break
and loophole game. Their huge tax savings have enriched executives but
not created significant numbers of new jobs.
Our
report analyzes the 92 publicly held American corporations that
reported a profit in the United States every year from 2008 through 2015
and paid less than 20 percent of their earnings in federal income tax.
We
chose this particular tax threshold because, as Mr. Stephenson
mentioned, House Republicans are proposing to reduce the federal
statutory corporate tax rate to 20 percent, down from the current 35
percent. President Trump wants an even deeper cut, down to 15 percent.
If
claims about the job-creation benefits of lower tax rates had any
validity, these 92 consistently profitable firms would be among the
nation’s strongest job creators. Instead, we found just the opposite.
The
companies we reviewed had a median job-growth rate over the past nine
years of nearly negative 1 percent, compared with 6 percent for the
private sector as a whole. Of those 92 companies, 48 got rid of a
combined total of 483,000 jobs.
At
the companies that cut jobs, chief executives’ pay last year averaged
nearly $15 million, compared with the $13 million average for S&P
500 companies.
Instead
of tax-rate cuts for these big corporations, the coming tax debate in
Congress should focus on making wealthy individuals and big corporations
pay their fair share.
American
multinationals hold $2.6 trillion in profits “offshore,” on which they
would owe $750 billion in federal taxes if the money was repatriated. In
most cases, these foreign profit stashes are merely an accounting
fiction. Companies retain full access to these funds for use in the
United States and could, if their executives so chose, use them to
create jobs here.
Ordinary
Americans have to pay all the taxes they owe each and every year.
Offshore corporations should be required to do the same.
Beyond closing loopholes, we need to explore new ways to raise revenue fairly, including a tax on Wall Street speculation.
Most
of us already pay a sales tax on gasoline, clothes and other basics.
Why should hedge fund investors and other Wall Street traders pay no tax
at all when they engage in short-term buying and selling of millions of
dollars’ worth of stocks and derivatives? A fee of just a small
fraction of 1 percent on each Wall Street trade would encourage
longer-term investment while generating huge revenue for real job
creation.
At a town hall
this month at AT&T headquarters in Dallas, Mr. Stephenson urged his
employees to call Congress and demand a corporate tax cut.
The
message policy makers really need to hear? Stop peddling the myth that
“tax relief” for big companies will be good for the rest of us.
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