New Report Shows No Link Between Corporate Tax Cuts and Job Creation

Mark Gruenberg

Mark Gruenberg Editor, Press Associates Union News

Advocates of huge corporate tax cuts contend such incentives to “job creators” leads to higher employment, but a new report, investigating past tax cuts’ impact and subsequent job outcomes, reveals that’s wrong.

Instead, Sam Pizzigati and Sarah Anderson, co-editors of Inequality.org at the Institute for Policy Studies, discovered through public records that more than half of the big firms they studied – 48 out of 92 -- which already pay taxes at low rates, actually cut jobs.

Their 32-page report directly contradicts claims by business lobbies and congressional Republicans, all the way back to the Reagan administration and its infamous Laffer Curve.

The two probed the finances and job creation records of 92 Standard and Poors top 500 firms whose tax rates would be as low or lower than the 15 percent corporate rate GOP President Donald Trump and House Speaker Paul Ryan, R-Wis., want to enact.

“These findings beg an obvious question: If these tax-dodging firms are not creating jobs, what are these firms doing with all their proceeds from tax avoidance? Available numbers do make plain that tax-dodging firms are routinely funneling more money into the pockets of their top executives than other big firms,” the two write.

“Our corporate executive class has spent recent years framing corporate ‘tax relief’ as a clear benefit for workers. In fact, lower corporate tax rates benefit only top executives. Our national debate over corporate tax rates should focus on ensuring the corporations these executives run pay their full and fair tax share.”

Whether Ryan, Trump and other ruling Republicans will pay attention to the report’s findings is unlikely. As former House Budget Committee Chairman, Ryan consistently pushed for lower corporate taxes, and Trump advocated the same thing on the 2016 campaign trail.

The compared the 92 U.S. public corporations that were profitable every year from 2008-15 and that paid less than 20 percent of earnings in federal corporate taxes, despite a nominal 35 percent U.S. corporate tax rate, with other S&P 500 firms.

While those 92 firms paid the low taxes, they cut total jobs by a median of 0.7 percent, the report revealed. The median is the point where half the firms (46) were above and half below. And the 48 companies who actually reduced jobs cut an average of 10,000 workers each. By contrast, all U.S. publically held firms increased jobs by 6 percent.

And most of those 92 firms gave their CEOs huge raises, says the report, whose data came from public filings.

The biggest job cutters among the firms that paid 20 percent or less in taxes were AT&T (-79,450 jobs), Verizon (-78,450), ExxonMobil (-37,735), United Technologies (-37,000), JP

Morgan Chase (-26,961), 21st Century Fox (-20,100), L-3 Communications (-14,800), GE (-14,700), IBM (-12,969) and Wells Fargo (-12,600). Fox canned almost half of its U.S. workers (48 percent). Verizon and Exxon each let a third go. Exxon’s cuts include overseas workers.

CEO pay and compensation in 2016 at those ten ranged from $13 million at Wells Fargo to $34.6 million at Fox. AT&T CEO Randall Stephenson got the biggest raises over that time, a total of 146 percent, while Fox Chief Rupert Murdoch finished second, at 74 percent.

Stephenson’s high pay and perks, at a time when he demanded his union workers take low raises, pay much more for their health care and allow unlimited outsourcing of their jobs, was one trigger that forced AT&T’s workers, all Communications Workers members, out on a 45-day strike in 2016. The union won.

Nine of the top 10 firms in job cuts paid between 8.1 percent (AT&T) and 19.2 percent (L-3) of their earnings in U.S. taxes over the same time period. The tenth, GE, got money back (-3.4 percent) from the Treasury.

Among all 92 firms in the survey, average CEO pay increased 18 percent in real dollars, to $13.4 million yearly, from 2008-2016. CEOs in the rest of the S&P 500 saw 13 percent average raises, while workers, in those same eight years, got average raises totaling four percent. Other findings included:

ExxonMobil paid its CEO, Rex Tillerson, now Trump’s Secretary of State, $27.4 million total compensation in 2016, 22 percent more than eight years before. And Tillerson got a $180 million golden parachute when he left to join Trump’s team. ExxonMobil also spent $146 billion, leading everyone, in buying back its own stock. It also paid only 13.6 percent of its income in taxes and cut a third of its global workforce. The firm does not release separate job figures for its U.S. operations. 

GE used offshore tax havens, $42 billion in stock buybacks and high pay for CEO Jeffrey Immelt ($18 million last year), among other tactics, to get money back from Uncle Sam from 2008-16. Its effective tax rate was -3.4 percent. GE also let 14,700 workers go. 

Wells Fargo ($31.4 billion) and JP MorganChase ($22.2 billion) finished second and third in federal subsidies during the Great Recession, which their financial finagling helped create. Even after Wells Fargo bought up other banks, it shed 12,800 workers, plus 5,300 recently let go for creating millions of phony bank accounts and charging customers for them.  CEO John Stumpf, pushed out after that scandal, walked away with a $133 million buyout.

JP MorganChase CEO Jamie Dimon cut almost 27,000 jobs in 2008-15. His pay and perks last year, much of it in stock buybacks, totaled $27 million.

“CEOs of large corporations have for far too long been rigging the rules to enrich themselves at the expense of taxpayers, workers, and communities.” Pizzigati and Anderson conclude. “We need a tax reform debate that dispenses with the fantastical notion corporate tax cuts will automatically create good jobs for American workers.”

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Posted In: Allied Approaches, From Press Associates

Union Matters

Get to Know AFL-CIO's Affiliates: National Association of Letter Carriers

From the AFL-CIO

Next up in our series that takes a deeper look at each of our affiliates is the National Association of Letter Carriers.

Name of Union: National Association of Letter Carriers (NALC)

Mission: To unite fraternally all city letter carriers employed by the U.S. Postal Service for their mutual benefit; to obtain and secure rights as employees of the USPS and to strive at all times to promote the safety and the welfare of every member; to strive for the constant improvement of the Postal Service; and for other purposes. NALC is a single-craft union and is the sole collective-bargaining agent for city letter carriers.

Current Leadership of Union: Fredric V. Rolando serves as president of NALC, after being sworn in as the union's 18th president in 2009. Rolando began his career as a letter carrier in 1978 in South Miami before moving to Sarasota in 1984. He was elected president of Branch 2148 in 1988 and served in that role until 1999. In the ensuing years, he worked in various roles for NALC before winning his election as a national officer in 2002, when he was elected director of city delivery. In 2006, he won election as executive vice president. Rolando was re-elected as NALC president in 2010, 2014 and 2018.

Brian Renfroe serves as executive vice president, Lew Drass as vice president, Nicole Rhine as secretary-treasurer, Paul Barner as assistant secretary-treasurer, Christopher Jackson as director of city delivery, Manuel L. Peralta Jr. as director of safety and health, Dan Toth as director of retired members, Stephanie Stewart as director of the Health Benefit Plan and James W. “Jim” Yates as director of life insurance.

Number of Members: 291,000 active and retired letter carriers.

Members Work As: City letter carriers.

Industries Represented: The United States Postal Service.

History: In 1794, the first letter carriers were appointed by Congress as the implementation of the new U.S. Constitution was being put into effect. By the time of the Civil War, free delivery of city mail was established and letter carriers successfully concluded a campaign for the eight-hour workday in 1888. The next year, letter carriers came together in Milwaukee and the National Association of Letter Carriers was formed.

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There is Dignity in All Work

There is Dignity in All Work