How Companies Will Use the Extra Revenue Available under the New Tax Laws

The new tax law, signed by President Trump last month, will be a boon to many companies, lowering the corporate tax rate from 35% to 21%. Retail giant Walmart is expected to reap a $1 billion benefit from the slashed corporate rate. One of the obvious questions on the minds of many—what will businesses do with that extra cash? As of mid-January, nearly 200 large corporations had acknowledged that they will use the additional cash flow to invest in employees, infrastructure and shareholders. Here are some of the ways that businesses have already indicated they will use the additional revenue available because of the tax law revisions.

Increased Wages and Employee Bonuses

A number of companies have announced that they will raise wages and/or pay bonuses to employees with some of the extra cash they’ll have:

  • IAT Insurance Group announced the largest bonus payout, with $3,000 going to approximately 700 non-executive employees.
  • Walmart plans to bump its internal minimum wage up from $10 an hour to $11 an hour. The company will also offer one-time bonuses of up to $1,000 to many of its workers, based on longevity.
  • AT&T says it will give $1,000 bonuses to more than 200,000 employees and plans to invest more than a billion dollars in the United States over the next five years.
  • Wells Fargo will raise its base hourly wage from $13.50 to $15
  • Cable TV and broadcast industry leader Comcast says it will issue $1,000 bonuses to most of its employees
  • Western Alliance Bancorporation plans to bump up the hourly wage of its lowest-paid 50% of workers, giving them a 7.5% increase

Enhanced Retirement Benefits

Dozens of corporations have promised to help employees beef up their retirement portfolios:

  • Insurance industry icon Aflac plans to increase the 401(k) match on every employee’s first 4% of compensation from 50% to 100% and will make a one-time $500 contribution to every worker’s 401(k)
  • Advance Financial plans to increase its 401(k) match and its profit sharing plan for employees
  • Peoples Bank will raise its 401(k) match to 8% for all eligible employees
  • SunTrust Banks, Inc., intends to make additional 401(k) contributions for its employees

Stock Buybacks and Dividend Increases

Many companies have also indicated that they will take concrete steps to benefit shareholders, either through increased stock dividends or decisions to repurchase company stock. In fact, to date, more than 30 companies have said they will repurchase shares of common stock. Those stock repurchase plans total nearly $85 billion:

  • Home Depot will repurchase $15 billion in company stock, the highest buy-back announced thus far
  • Honeywell intends to buy back $6.5 billion in equity
  • Boeing announced a 20% increase in the stock dividend it will pay and also disclosed a plan to buy back about $4 billion worth of its stock.
  • United Airlines plans to repurchase approximately $3 billion of its equity in the market

Reduced Fees and Rates to Consumers

A number of utility companies have disclosed that they will pass some of the tax savings on to customers in the form of lower rates:

  • Baltimore Gas & Electric has petitioned the Maryland Public Service Commission to lower the rates it charges for both electrical power and natural gas. Company officials say the average consumer can expect to save more than $4 a month on utilities and the total savings in the state will be around $82 million.
  • Eversource Massachusetts Electric Operations has proposed a $35 million rate decrease for its customers in the eastern part of the state. That’s a turnaround from just two months ago, when the Massachusetts Department of Public Utilities approved a $12.2 million increase for the same customers.
  • Commonwealth Edison says it will pass on more than $200 million in tax savings to its customers in Illinois
  • Pepco, in the nation’s capital, promises reduced utility bills for nearly 300,000 customers in the District of Columbia

Reinvestment and Business Expansion

Many businesses have also stated that they will substantially increase spending and investment in the United States as a result of the tax breaks:

  • AT&T intends to raise capital spending in America by approximate a billion dollars
  • Fiat Chrysler has announced that it will spend approximately $1 billion to build a new plant in Warren, Michigan.
  • Comcast says it will reinvest more than $50 billion in infrastructure over the next five years
  • Boeing will commit to spend $100 million for new infrastructure and facilities

Increased Charitable Giving

Charitable organizations are also expecting a windfall as a consequence of the tax law change:

  • Boeing will make addition charitable contributions of around $100 million
  • Commerce Bank says it will bump up it’s giving by as much as $25 million
  • PNC Financial Services has indicated it will donate an additional $200 million to charitable organizations

 

 

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