The tax reform debate has been replaced with talk of comprehensive immigration reform and avoiding another Government shut down. Nevertheless, no one can argue with the immediate positive response from some of the country’s largest employers. Many have announced plans to increase their minimum wage to anywhere between $15 to $18 an hour, in addition to expanding their current labor force.
Tax Reform responsible for wage increase and bonus payouts
The recent passage of the landmark tax overhaul is inspiring more companies to increase their wages and benefits as competition for top talent is at an all-time high. Several corporations are also planning significant reinvestment into their respective businesses and other interests.
Despite the outcry that tax reform only benefits the wealthy, many would agree that wealthy people usually don’t work for companies like FedEx, Waste Management, or Walmart. On January 11, 2018, Walmart officials announced that their workers would soon reap benefits because of the new GOP tax plan. The announcement included a proposed increase in the starting wage to $11 an hour, and expanded maternity and parental leave benefits. Before the new tax plan went into effect, Walmart training pay was $9, once completed, workers received a dollar increase. In addition to the expanded benefits and higher starting wage, based on tenure, employees may qualify for a cash bonus. Anyone with the company over 20 years receive $1000. However, workers with less than two years of service will get $200. For everyone else the breakdown looks like this; employees with 15 – 19 years of service receive $750, 10 – 14 years $400, five to nine years $300, and those with two to four years of service will get $250.
Walmart CEO Doug McMillon said, “Tax reform gives us the opportunity to be more competitive globally and to accelerate plans for the U.S.” In a report released by CNBC, McMillon elaborated on how the tax reform could ultimately impact prices for consumers.
We are early in the stages of assessing the oportunities tax reform create for us to invest in our customers and associates and to further strengthen our business, all of which should beneft our sharholders. However, some guiding themes are clear and consistent with how we’ve been investing – lower prices for custoemrs, better wages and training for associates and investements in the future of our company, including in technology.
More companies to pass tax reform benefits onto their employees
The announcement by the world’s number one retailer came among similar statements by other corporations such as FedEx, Waste Management, Jet Blue, and Bank of America. Lowe’s is also providing more than 260,000 of its hourly employee’s bonuses of up to $1000. The big box retailer plans to shorten its eligibility time for new employees who want to take advantage of the company’s health plans. New employees will have the option to sign up in their first 30 days of employment, according to FOX Business.
All significant retailers welcome the lower corporate tax rate. Sandy Kenedy, president of the Retail Industry Leaders Association, says, “Retailers have traditionally paid the highest effective corporate tax rates.” She also believes, “A fairer and more competitive tax code will give retailers the ability to modernize stores, invest in their workforce and continue to transform the shopping experience for consumers.”
The new tax bill receives raving support from top economists
More money in the hands of the working-class through bonuses and increased wages is the foundation to economic growth. In fact, in an open letter to Congress, 137 economists voiced high praise for the new tax bill. Opponents of the tax bill cite national deficit concerns. However, the economists suggest considering that $1 trillion of increased government revenue can be generated by four-tenths of a percentage in GDP growth. Additionally, the consensus among the economists is that a competitive corporate rate is significant to a growing economy driven by capital stock, business formation, higher investment, and productivity, according to a report by CNBC.
The push for a tax overhaul was, in-part driven by the fact that the U.S has lost much of its competitive edge. Between 2004 and 2016 America forfeited 4700 companies to cheaper shores abroad, lowering the highest corporate rate in the industrialized world will result in a reversal of the trend.
“The enactment of a comprehensive overhaul – complete with a lower corporate tax rate – will ignite our economy with levels of growth not seen in generations.”
By Jireh Gibson
Fox Business: Tax reform windfall: These Companies are hiking pay, delivering bonuses
CNBC: Walmart to raise its starting wage to $11, give some employees bonuses following tax bill passage
CNBC: An open letter to Congress signed by 137 economists supporting GOP tax reform bill