Will retailers regret raising worker expectations around corporate tax cuts?
Back in the fall, as retailers were pushing to get corporate tax cut legislation passed, it was common to hear the argument based on a National Retail Federation (NRF) analysis, that the average employee of a U.S. “C” corporation was being paid nearly $4,700 less per year because of the previous rate.
In last night’s state of the union address, President Trump doubled down on the windfall promised American workers when he said, “We slashed the business tax rate from 35 percent all the way down to 21 percent, so American companies can compete and win against anyone in the world. These changes alone are estimated to increase average family income by more than $4,000.”
While few if any seriously thought passage of the Tax Cuts and Jobs Act would result in significant pay raises for workers, is it possible that the arguments made to get the legislation made into law will come back to sow discontent among retail associates who feel they’ve gotten the short end of the stick?
While not specific to the retailing industry, a poll conducted by Reuters/Ipsos between Jan. 12 and 23 found that only two percent of adults have received a pay increase, bonus and/or increased benefits due to the new law. While it is still early, those companies that have announced pay raises, bonuses or an expansion of benefits do not appear to be anywhere near the higher end figures used to drum up support for the legislation before it became law.
Home Depot, one of the highest profile retailers to announce an employee bonus that management attributed directly to the lowering of the corporate tax rate, has been criticized in the aftermath for its perceived stinginess.
A Los Angeles Times’ article points out that in the case of Home Depot, the $1,000 bonus only went to workers with 20 years or more with the company. But, even if it had paid that bonus to all 380,000 of its hourly workers, the company would have been out $380 million. In December, Home Depot’s board voted to buy back $15 billion in company stock based on the expectation that its corporate tax rate was about to fall.
- Few U.S. adults report bonuses, raises from Republican tax law – Reuters
- Home Depot’s bonuses underscore what workers get out of the corporate tax cut: Peanuts – Los Angeles Times
- Retailers Say Tax Reform Could Provide Major Boost For The Economy – National Retail Federation
- Wal-Mart has announced thousands of layoffs since publicizing bonuses and benefits expansion – MarketWatch
- State of the Union 2018: Read the full transcript – CNN
DISCUSSION QUESTIONS: Have retailers made a mistake in appearing to promise that workers would see a significant increase in income and benefits as a result of the Tax Cuts and Jobs Act? Will the difference between the lobbying rhetoric and paycheck reality, for example, open an opportunity for unions to organize retail store employees?