November 19, 2019/Press

Tillis’ Corporate Tax Giveaways in Raleigh & Washington: “A Mistake That’s Holding Back North Carolina”

Raleigh – Two new reports over the weekend expose Senator Tillis’ economic record as one that looks out for the wealthy and corporations at the expense of teachers and the middle class, noting that in both Raleigh and Washington Senator Tillis offered a “false promise” for working families and a “windfall” for corporations.

First, the News & Observer editorial board, together with an analyst from a non-partisan think tank, found that North Carolina “has underperformed most of its neighbors” following then-Speaker of the House Thom Tillis’ corporate tax cuts, which preserved tax breaks for country clubs, golf courses, yachts, and private jets yet eliminated tax breaks that working North Carolinians relied on. The editorial board dubbed it “a mistake that’s holding back North Carolina” and noted that state employees and teachers are paying the price.

Then, the New York Times revealed that the Tillis-backed 2017 Republican tax scam was a “windfall” for big corporations, which “have spent nearly three times as much on additional dividends and stock buybacks, which boost a company’s stock price and market value, than on increased investment.” The GOP tax scam was a “false promise” that never materialized – instead, corporations are reaping massive windfalls while workers are left out to dry.

News & Observer: The verdict is in on NC’s tax cuts. They’re not working
By the Editorial Board
November 17, 2019

Key Points:

  • The verdict is in on President Trump’s 2017 corporate tax cut: It didn’t work.
  • This umpteenth example of the false promise of trickle-down economics raises anew questions about North Carolina’s aggressive cutting of corporate taxes. The Republican-led General Assembly started phasing in tax cuts in 2013 that now cost about $3.6 billion a year in lost revenue. The estate tax was eliminated and the progressive income tax was reduced to a flat tax, but the most dramatic cut was a reduction in the corporate tax rate. Since 2013 it has been reduced from a high of 6.9 percent — then the highest in the Southeast — to 2.5 percent today. Among 44 states that have a corporate tax, North Carolina’s is the lowest.
  • What has been the effect? State employees, teachers and state services have certainly felt the reduction in state revenue. But the boom that was supposed to come with making the state more “business friendly” hasn’t happened. The economy has grown as the state’s population has increased and the national economic recovery has lifted all states, but North Carolina’s mix of tax cuts and spending austerity has produced more pain than gain.
  • “The bottom line is that North Carolina, like Kansas before it, has shown that cutting taxes does not have much, if any, positive impact on job creation,” [Center for Budget and Priorities analyst] Mazerov said.
  • Mazerov said, “States are shooting themselves in the foot when they cut taxes and cut back on investments in these crucial building blocks of the state economy.”
  • A targeted tax cut can help a struggling economy when the tax savings go to consumers who will spend it. But North Carolina’s across-the-board giveaway to corporations during a period of economic growth is not that kind of tax cut. It’s a mistake that’s holding back North Carolina. Republican lawmakers won’t admit the mistake — that’s why they keep making it. But next November, voters should correct it.

New York Times: How FedEx Cut Its Tax Bill to $0
By Jim Tankersley, Peter Eavis and Ben Casselman
November 17, 2019

Key Points:

  • In the 2017 fiscal year, FedEx owed more than $1.5 billion in taxes. The next year, it owed nothing. What changed was the Trump administration’s tax cut — for which the company had lobbied hard.
  • Nearly two years after the tax law passed, the windfall to corporations like FedEx is becoming clear. A New York Times analysis of data compiled by Capital IQ shows no statistically meaningful relationship between the size of the tax cut that companies and industries received and the investments they made. If anything, the companies that received the biggest tax cuts increased their capital investment by less, on average, than companies that got smaller cuts.
  • FedEx’s financial filings show that the law has so far saved it at least $1.6 billion. Its financial filings show it owed no taxes in the 2018 fiscal year overall. Company officials said FedEx paid $2 billion in total federal income taxes over the past 10 years.
  • As for capital investments, the company spent less in the 2018 fiscal year than it had projected in December 2017, before the tax law passed. It spent even less in 2019. Much of its savings have gone to reward shareholders: FedEx spent more than $2 billion on stock buybacks and dividend increases in the 2019 fiscal year, up from $1.6 billion in 2018, and more than double the amount the company spent on buybacks and dividends in fiscal year 2017.
  • FedEx’s use of its tax savings is representative of corporate America. Companies have already saved upward of $100 billion more on their taxes than analysts predicted when the law was passed. Companies that make up the S&P 500 index had an average effective tax rate of 18.1 percent in 2018, down from 25.9 percent in 2016, according to an analysis of securities filings. More than 200 of those companies saw their effective tax rates fall by 10 points or more. Nearly three dozen, including FedEx, saw their tax rates fall to zero or reported that tax authorities owed them money.
  • From the first quarter of 2018, when the law fully took effect, companies have spent nearly three times as much on additional dividends and stock buybacks, which boost a company’s stock price and market value, than on increased investment.