The Dallas Morning News (TNS)
Two months into the new tax law, there’s a flood of news on how it is trickling down to American workers. Big tax savings for companies are translating into pay raises and bonuses and promises to invest billions in U.S. projects.
Despite the recent volatility on Wall Street, investors have been rewarded, and the Dallas region has reason to cheer, because corporate tax cuts will reverberate here. At least 20 publicly traded companies in North Texas spend over $100 million annually on income taxes and their effective tax rates have fallen sharply.
Of course, tax reform comes with a price tag, adding more than $1 trillion to the deficit over the next decade. Our preference is for policies that improve the federal fisc, so what we recommend now is that corporate America make the most of this opportunity to create broad, sustainable economic growth.
That means investing tax savings with a long game in mind, which can include hiring more people, spending more on training and development, adopting or investing in new technology that can raise productivity, or pursuing acquisitions that can move the needle for American workers.
The tax law reduces the federal corporate tax rate from 35 percent to 21 percent, from one of the highest in the developed world to lower than the global average. Companies will save $1.3 trillion over 10 years, the biggest cut in the tax law.
More than 300 employers have announced one-time bonuses and other perks for workers. That’s real money, even if some critics dismiss it as a “gimmick.”
So far,we are impressed with some high-profile commitments to ramp up investment. AT&T, already one of the nation’s biggest spenders on infrastructure, will invest an additional $1 billion in 2018. Such telecom spending typically creates 7,000 jobs.
JP Morgan Chase plans to invest $20 billion over five years. Chase will open up to 400 branches and hire 4,000 people nationwide. The bank will also spend more on pay raises, charity and loans for small business and affordable housing.
Exxon Mobil plans to spend over $50 billion over five years to expand operations in the U.S. There will be more oil production in the Permian Basin, new manufacturing sites, infrastructure improvements and thousands of additional hires.
The new tax policy, along with changes in regulations, will enhance Exxon Mobil’s competitive position, which is why the company’s CEO, Darren Woods, is saying things like it is “good to see sound policy laying the groundwork for America’s future economic success.”
The key point is that tax reform is an opportunity to create future success. Now companies must deliver on that promise. After memories of $1,000 bonuses fade, we’ll be asking, “What did you do with the tax cut?”