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15 Big Corporations Used Trump Tax Cuts to Pump $839 Billion Into Buybacks, Dividends
"There's nothing to be gained for everyday Americans by doubling down on the Trump corporate tax breaks—a historic mistake that added trillions to the deficit while threatening critical priorities like Social Security and Medicare."
Oct 23, 2024
The 15 largest corporate beneficiaries of former President Donald Trump's 2017 tax law have dumped a combined $839 billion into executive-enriching stock buybacks and dividends since the measure's passage, according to research released Wednesday by the progressive watchdog group Accountable.US.
The new analysis, which cites figures from the Institute on Taxation and Economic Policy, was published amid an ongoing congressional debate over whether to extend elements of the 2017 law that are set to expire at the end of next year. It also comes as Trump, the Republican presidential nominee, is campaigning on a fresh round of tax cuts for the wealthy and large corporations.
Republican lawmakers, bolstered by an army of corporate lobbyists, have signaled that they are prepared to quickly ram through new tax breaks if Trump wins the presidency and the GOP secures control of the House and Senate in next month's election.
Vice President Kamala Harris, the Democratic nominee, has proposed raising the corporate tax rate from 21% to 28%.
"The biggest corporate winners of the Trump tax giveaway used their massive windfall mostly to pad profits and enrich a small group of wealthy investors instead of raising their workers' wages and lowering prices for consumers," Accountable.US president Caroline Ciccone said in a statement. "There's nothing to be gained for everyday Americans by doubling down on the Trump corporate tax breaks—a historic mistake that added trillions to the deficit while threatening critical priorities like Social Security and Medicare."
"It's time billionaires, wealthy tax cheats, and price-gouging corporations stop avoiding their fair share of taxes at the expense of everyone else," Ciccone added.
"The Trump administration's giant corporate tax cut mainly resulted in higher executive pay and massive shareholder payouts."
The 15 corporations examined in the new report are Verizon, Walmart, AT&T, Meta, Home Depot, Intel, Comcast, Walt Disney, Visa, Capital One Financial, Lockheed Martin, Amazon, Lowe's, United Parcel Service (UPS), and Texas Instruments.
Collectively, according to the Accountable.US report, those companies saw their profits surge by over $257 billion and have spent over $464 billion on stock buybacks and $374 billion on dividends since the passage of the Trump-GOP tax cuts. Large shareholder payouts in the form of share repurchases—which are on track for a new U.S. record in 2024—have been linked to mass layoffs.
In the years preceding enactment of the 2017 law, which cut the statutory corporate tax rate from 35% to 21%, the 15 corporations studied in the new analysis paid an average effective tax rate of 27%. In the four years following the law's passage, the companies paid an average effective rate of 13%.
Meanwhile, the substantial benefits that the law's boosters promised the U.S. working class have not materialized.
As the Center on Budget and Policy Priorities noted over the summer, "Trump administration officials claimed their centerpiece corporate tax rate cut would 'very conservatively' lead to a $4,000 boost in household income," but "research shows that workers who earned less than about $114,000 on average in 2016 saw 'no change in earnings' from the corporate tax rate cut, while top executive salaries increased sharply."
Bharat Ramamurti, former deputy director of the National Economic Council, said Wednesday that "instead of trickling down to higher wages for workers and producing a surge in business investment as they claimed at the time, the Trump administration's giant corporate tax cut mainly resulted in higher executive pay and massive shareholder payouts."
"It was a failed approach," said Ramamurti, "and Congress should use the expiration of key provisions of the Trump tax bill next year to bring in more revenue from corporations and the wealthy."
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Southwest Airlines Spent $5.6 Billion on Shareholder Gifts in Years Ahead of Mass Cancellation Crisis
"Southwest Airlines made a risky gamble that mass layoffs and spending billions of dollars on handouts to investors rather than fixing infrastructure would pay off with record profits," said one watchdog. "The airline lost that bet badly."
Dec 28, 2022
As travelers and airline workers reel from mass flight cancellations, a corporate watchdog noted Wednesday that Southwest spent nearly $6 billion on stock buybacks in the years ahead of the coronavirus pandemic instead of devoting those resources to technological improvements that unions have been demanding for years.
According to Accountable.US, the crisis Southwest has experienced in recent days amid a massive winter storm is "a problem of its own making." The organization pointed out that the airline opted "to spend $5.6 billion on stock buybacks in the three years leading up to the pandemic rather than making investments in infrastructure to be better prepared for extreme weather events like this week."
The watchdog group added that the company "even reinstated dividends earlier this month, the first major airline to do so after the pandemic."
"Southwest Airlines made a risky gamble that mass layoffs and spending billions of dollars on handouts to investors rather than fixing infrastructure would pay off with record profits," Kyle Herrig, the president of Accountable.US, said in a statement. "The airline lost that bet badly and now it's their customers left paying the price including the thousands stranded in the middle of holiday season travel."
"Southwest's well-compensated executives could have prioritized its workers and customers by preparing for the worst, but greed trumped all as they put a small group of wealthy investors first," Herrig added. "Consumers shouldn't be the ones stuck holding the bag for Southwest's greedy management decisions, but here we are. This is where the Transportation Department should start in any investigation into why this happened."
Southwest has canceled more than 5,000 flights this week—accounting for the bulk of flights canceled in the U.S.—and delayed hundreds more, stranding travelers and flight attendants, throwing holiday plans into chaos, and straining already-exhausted flight crews.
"Southwest's well-compensated executives could have prioritized its workers and customers by preparing for the worst, but greed trumped all."
Unions representing flight attendants and pilots have said that while the winter storm fueled some of the cancellations, deliberate decisions by Southwest management were ultimately responsible for what's been described as the company's "full-blown meltdown."
Specifically, the vice president of the Southwest Airlines Pilots Association toldInsider that the company's "outdated" scheduling software has been overwhelmed, wreaking havoc on operations.
"When we get out of position, it's a tough task for our schedulers to put it back together, and right now they're having to do it by hand," said Captain Mike Santoro, explaining that some flights were unnecessarily canceled because the airline's system was unable to adequately keep track of employees.
Lyn Montgomery, president of TWU Local 556, the union that represents flight attendants, told a local news outlet that "this is the worst I've ever seen in my 27 years of working as a flight attendant for Southwest Airlines."
"Obviously, the impact of Winter Storm Elliott created the issues, but the Southwest Airlines systems cannot recover because we have outdated technology," Montgomery said.
The New York Timesreported Wednesday that many of the scheduling issues "stem from the carrier's unique 'point-to-point' model, in which planes tend to fly from destination to destination without returning to one or two main hubs."
"Most airlines follow a 'hub-and-spoke' model, in which planes typically return to a hub airport after flying out to other cities," the Times noted. "When bad weather hits, hub-and-spoke airlines can shut down specific routes and have plans in place to restart operations when the skies clear. But bad weather can scramble multiple flights and routes in a point-to-point model, leaving Southwest staff out of position to resume normal operations."
\u201cWhen you dig into issues at airlines, banks, or other industries with large information technology needs, it often comes down to having multiple legacy systems, due to mergers, that don't talk to each other well and can't be updated because they would fully break.\u201d— David Dayen (@David Dayen) 1672159352
Randy Barnes, president of TWU Local 555, the union that represents Southwest ground workers, said in a statement Wednesday that "if airline managers had planned better, the meltdown we've witnessed in recent days could have been lessened or averted."
"Ground workers need more support," Barnes added. "Many of our people have been forced to work 16- or 18-hour days during this holiday season. Our members work hard, they're dedicated to their jobs, but many are getting sick, and some have experienced frostbite over the past week. In severe weather, it's unreasonable for workers to stay outside for extended periods. People need to be able to cycle in and out of the cold. The airline needs to do more to protect its ground crews."
More than 90% of the 2,760 cancellations in the U.S. thus far on Wednesday have been Southwest flights, according to data compiled by FlightAware.
The company's massive failures have drawn scrutiny from members of Congress and the U.S. Department of Transportation, which has said it is looking into the cancellations.
"This has clearly crossed the line from what’s an uncontrollable weather situation to something that is the airline’s direct responsibility,” Transportation Secretary Pete Buttigieg said late Tuesday in an appearance on "NBC Nightly News."
In a statement, Senate Commerce Committee Chair Maria Cantwell (D-Wash.) similarly argued that "the problems at Southwest Airlines over the last several days go beyond weather."
"The committee will be looking into the causes of these disruptions and its impact to consumers," said Cantwell. "Many airlines fail to adequately communicate with consumers during flight cancellations. Consumers deserve strong protections, including an updated consumer refund rule."
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Bank of North Dakota Soars Despite Oil Bust: A Blueprint for California?
May 02, 2016
Despite North Dakota's collapsing oil market, its state-owned bank continues to report record profits. This article looks at what California, with fifty times North Dakota's population, could do following that state's lead.
In November 2014, the Wall Street Journal reported that the Bank of North Dakota (BND), the nation's only state-owned depository bank, was more profitable even than J.P. Morgan Chase and Goldman Sachs. The author attributed this remarkable performance to the state's oil boom; but the boom has now become an oil bust, yet the BND's profits continue to climb. Its 2015 Annual Report, published on April 20th, boasted its most profitable year ever.
The BND has had record profits for the last 12 years, each year outperforming the last. In 2015, it reported $130.7 million in earnings, total assets of $7.4 billion, capital of $749 million, and a return on investment of a whopping 18.1 percent. Its lending portfolio grew by $486 million, a 12.7 percent increase, with growth in all four of its areas of concentration: agriculture, business, residential, and student loans.
By increasing its lending into a collapsing economy, the BND has helped prop the economy up. In 2015, it introduced new infrastructure programs to improve access to medical facilities, remodel or construct new schools, and build new roads and water infrastructure. The Farm Financial Stability Loan was introduced to assist farmers affected by low commodity prices or below-average crop production. The BND also helped fund 300 new businesses.
Those numbers are awe-inspiring, considering that North Dakota has a population of only about 750,000, just half the size of Phoenix or Philadelphia. Compare that to California, the largest state by population, which has more than fifty times as many people as North Dakota.
What could California do with its own bank, following North Dakota's lead? Here are some possibilities, including costs, risks and potential profits.
Getting Started: Forming a Bank Without Cost to the Taxpayers
A bank can be started in California with an initial capitalization of about $20 million. But let's say the state wants to do something substantial and begins with a capitalization of $1 billion.
Where to get this money? One option would be the state's own pension funds, which are always seeking good investments. Today state pension funds are looking for a return of about 7% per year (although in practice they are getting less). One billion dollars could be raised more cheaply with a bond issue, but tapping into the state's own funds would avoid increasing state debt levels.
At a 10% capital requirement, $1 billion in capitalization is sufficient to back $10 billion in new loans, assuming the bank has an equivalent sum in deposits to provide liquidity.
Where to get the deposits? One possibility would be the California Pooled Money Investment Account (PMIA), which contained $67.7 billion earning a modest 0.47% as of the March 31, 2016 quarter. This huge pool of rainy day, slush and investment funds is invested 47.01% in US Treasuries, 16.33% in certificates of deposit and bank notes, 8.35% in time deposits, and 8.91% in loans, along with some other smaller investments. A portion of this money could be transferred to the state-owned bank as its deposit base, on which 0.5% could be paid in interest, generating the same average return that the PMIA is getting now.
For our hypothetical purposes, let's say $11.1 billion is transferred from the PMIA and deposited in the state-owned bank. With a 10% reserve requirement, $1.1 billion would need to be held as reserves. The other $10 billion could be lent or invested. What could be done with this $10 billion? Here are some possibilities.
Slashing the Cost of Infrastructure
One option would be to fund critical infrastructure needs. Today, California and other states deposit their revenues in Wall Street banks at minimal interest, then finance infrastructure construction and repair by borrowing from the Wall Street bond market at much higher interest. A general rule for government bonds is that they double the cost of projects, once interest is paid. California and other states could save these costs simply by being their own bankers and borrowing from themselves; and with their own chartered banks, they could do it while getting the same safeguards they are getting today with their Wall Street deposits and investments. The money might actually be safer in their own banks, which would not be subject to the bail-in provisions now imposed by the G-20's Financial Stability Board on giant "systemically risky" banking institutions.
To envision the possibilities, let's say California decided to fund its new bullet train through its state-owned bank. In 2008, Californians approved a bond issue of $10 billion as the initial outlay for this train, which was to run from Los Angeles to San Francisco. At then-existing interest rates, estimates were that by the time the bonds were paid off, California taxpayers would have paid an additional $9.5 billion in interest.
So let's assume the $10 billion in available assets from the state-owned bank were used to repurchase these bonds. The state would have saved $9.5 billion, less the cost of funds.
It is not clear from the above-cited source what the length of the bond issue was, but assume it was for 20 years, making the interest rate about 3.5%. The cost of one billion dollars in capital for 20 years at 7% would be $2.87 billion, and the cost of $11.1 billion in deposits at 0.5% would be $1.164 billion. So the total cost of funds would be $4.034 billion. Deducted from $9.5 billion, that leaves about $5.5 billion in savings or profit over 20 years. That's $5.5 billion generated with money the state already has sitting idle, requiring no additional borrowing or taxpayer funds.
What about risk? What if one of the cities or state agencies whose money is held in the investment pool wants to pull that money out? Since it is held in the bank as deposits, it would be immediately liquid and available, as all deposits are. And if the bank then lacked sufficient liquidity to back its assets (in this case the repurchase of its own bonds), it could in the short term do as all banks do - borrow from other banks at the Fed funds rate of about 0.35%, or from the Federal Reserve Discount Window at about 0.75%. Better yet, it could simply liquidate some of the $56 billion remaining in the PMIA and deposit that money into its state bank, where the funds would continue to earn 0.5% interest as they are doing now.
Assume that from its $5.5 billion in profits, the bank then repaid the pension funds their $1 billion initial capital investment. That would leave $4.5 billion in profit, free and clear - a tidy sum potentially generated by one man sitting in an office shuffling computer entries, without new buildings, tellers, loan officers or other overhead. That capital base would be sufficient to capitalize about $40 billion in new loans, all generated without cost to the taxpayers.
A California New Deal
The bullet train example is a simple way to illustrate the potential of a state-owned bank, but there are many other possibilities for using its available assets. As the BND did after building up its capital base, the bank could advance loans at reasonable rates for local businesses, homeowners, students, school districts, and municipalities seeking funds for infrastructure.
These loans would be somewhat riskier than buying back the state's own bonds, and they would involve variable time frames. Like all banks, the state bank could run into liquidity problems from borrowing short to lend long, should the depositors unexpectedly come for their money. But again, that problem could be fixed simply by liquidating some portion of the money remaining in the PMIA and depositing it in the state-owned bank, where it would earn the same 0.5% interest it is earning now.
Here is another intriguing possibility for avoiding liquidity problems. The bank could serve simply as intermediator, generating loans which would then be sold to investors. That is what banks do today when they securitize mortgages and sell them off. Risk of loss is imposed on the investors, who also get the payment stream; but the bank profits as well, by receiving fees for its intermediating functions.
The federally-owned Reconstruction Finance Corporation (RFC) did something similar when it funded a major portion of the New Deal and World War II by selling bonds. This money was then used for loans to build infrastructure of every sort and to finance the war. According to a US Treasury report titled Final Report of the Reconstruction Finance Corporation (Government Printing Office, 1959), the RFC loaned or invested more than $40 billion from 1932 to 1957 (the years of its operation). By some estimates, the sum was about $50 billion. A small part of this came from its initial capitalization. The rest was borrowed - $51.3 billion from the US Treasury and $3.1 billion from the public. The RFC financed roads, bridges, dams, post offices, universities, electrical power, mortgages, farms, and much more, while at the same time making money for the government. On its normal lending functions (omitting such things as extraordinary grants for wartime), it wound up earning a total net income of $690 million.
North Dakota has led the way in demonstrating how a state can jump-start a flagging economy by keeping its revenues in its own state-owned bank, using them to generate credit for the state and its citizens, bypassing the tourniquet on the free flow of credit imposed by private out-of-state banks. California and other states could do the same. They could create jobs, restore home ownership, rebuild infrastructure, and generally stimulate their economies while generating hefty dividends for the state without increasing debt levels or risking public funds - and without costing taxpayers a dime.
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