GOP Real Tax Stories: Best Buy
Since the GOP bill tax bill took effect in December, 2017 dozens of companies, including AT&T, American Airlines and U.S. Bancorp have announced $1,000 bonuses for employees. However a recent study shows that only 4.3 percent of workers will receive a one-time bonus or wage increase tied to the business tax cuts. GOP Tax Real Stories takes a closer look at these bonuses to help voters get a better look at the true incentive for — and impact of — these one time perks.
On Monday July 9th outgoing Speaker of the House Paul Ryan will participate in a speakers series at Best Buy Corporation with MN Representative Erik Paulsen. Although a Best Buy spokesman framed the visit as “moderated Q&A for employees who want to attend” it’s clearly a chance for Ryan to stump for Paulsen, a GOP incumbent facing a growing threat from Democratic candidate Dean Phillips.
I’m guessing Ryan and Paulsen will spend their time crowing about the one time bonuses that many Best Buy employees received. These bonuses were ostensibly due to the GOP tax cuts, which primarily reduced taxes for the wealthy and corporations.
In honor of the Speakers visit, lets take a closer look at the Best Buy bonuses.
Best Buy announced in 2017 it would give about 100,000 employees a one-time $1,000 cash bonus — a one time corporate expense of $10 Million.
$10 Million sounds like a lot of money, until you look at the big picture.
Best Buy’s gross revenue in 2017 was $39.4 Billion, with a net profit of $1.21 billion. Therefore these ONE TIME bonuses cost .82% of Best Buy’s net bottom line for 2017. Less than 1%.
Best Buy has said it can offer these bonuses because of the GOP tax cut. OK, but lets also look at the value of these tax cuts to Best Buy. Are the bonuses the best they can do for employees after the tax cut windfall?
My calculations are rudimentary but will capture the basic financial truth here. Follow along as I do some simple math:
In 2016 Best Buy showed an operating profit of $897 Million. The tax rate before the GOP corporate tax cut was 35%.
Therefore Best Buy would have paid just under $314 Million in federal taxes.(Side note: most corporations are able to take advantage of many loop holes to avoid paying taxes. The average effective tax rate — the rate actually paid by corporations — is 18%. So Best Buy likely paid far less.)
Under the new GOP Tax Bill the corporate rate has been lowered to 21% — a whopping 14% reduction. Under the NEW rate, Best Buy would pay approximately $188 Million in taxes, a net savings of $126 Million.
So $126 Million in savings in the first year alone — that’s 12 times the cost of the one time bonuses! Let’s contextualize this just a little more.
The average wage of a Best Buy employee is $11.81 an hour. Meanwhile, CEO Huber Joly’s annual salary (including stock options) is $16.7 Million. Based on a 40-hour week, he makes $8,028 per hour. Put another way — it takes Joly just over 3 hours to make what the average Best Buy employee makes in a year.
I don’t want to minimize the impact of a $1,000 bonus for employees that make under $25,000 a year. When I was a struggling single mom I lived that reality. $1,000 is a godsend. And yet, there is something essentially wrong with corporate tax cuts that don’t translate into higher wages and better benefits — into LONG TERM impact for employees.
As my friend Liz would say, ‘Get it straight’: For a relatively modest one-time investment of $10 Million in bonuses, Best Buy gets a PR home run and the GOP gets to brag about how they are helping working and middle class Americans. Don’t buy it.
The Republicans in Congress handed corporate America a giant wad of cash — and that cash will keep coming and coming and coming. The 14% corporate tax cut is permanent, but after 2025, all individual tax cuts are set to expire. These corporate tax cuts represents hundreds of billions of dollars — but only a tiny trickle will ever make it down to working class Americans like you and me.
Best Buy and and the many other companies offering these bonuses realize they are shrewd investments. They are explicitly linking these bonuses to the GOP Tax Bill. They are also using these bonuses as bait to try to convince you to keep a Republican majority in Congress, insuring that these corporate tax cuts remain permanent and company executives continue to make more money in one year than you and I would see in multiple lifetimes.
Fellow working Americans, could these companies be giving out $1000 one-time bonuses in an attempt to sway your vote?
I hope a Best Buy employee asks Speaker Paul Ryan and Representative Erik Paulsen why the tax cuts are not permanent for individuals. I hope they also ask them why these massive corporate tax cuts are not translating into higher wages for American workers. Lastly I hope the employees at Best Buy tell Ryan and Paulsen that cutting Medicare, Medicaid and/or Social Security to pay for these corporate tax cuts is unconscionable.
From Newsweek: “…a new analysis of all Fortune 500 companies found only 4.3 percent of workers will receive a one-time bonus or wage increase tied to the business tax cuts, while businesses received nine times more in cuts than what they passed on to their workers, according to Americans for Tax Fairness, a political advocacy group devoted to tax reform. The analysis also found that companies spent 37 times as much on stock buybacks than they did on bonuses and increased wages for workers.
Camille J. Gage is a Minneapolis artist and writer. She believes that progressive and fair taxes are how we invest in our future, protect our natural resources, and create a better world for our children and grandchildren.