Trump’s tax plan, we’re told, is going to cause a boom in jobs like we’ve never seen. With the money corporations will save from having their tax bill cut virtually in half, they’ll invest in American companies and American jobs, making America Great Again and putting all those coal miners back to work.
Among the list of companies enthusiastically nodding along to the party line, no-one’s head is bopping harder than AT&T. The telecoms giant has gone out of its way to repeatedly tell the world just how fantastic a tax cut would be.
Early this month, AT&T “pledged” an additional $1 billion investment in the US if tax reform is enacted, leading to a breathless press release from GOP House Speaker Paul Ryan. AT&T hasn’t specified what the investment would look like or how the money would be spent, instead citing non-specified research that “every $1 billion in capital invested in telecom creates about 7,000 good jobs for the middle class.”
On stage at a Morgan Stanley conference today, AT&T CFO John Stephens again went out of his way to tell reporters that a tax cut would not only cause AT&T to invest, but would lead to further investment from other companies, which would then need to buy telecoms services from AT&T:
CFO Stephens says tax reform could expand demand for @ATT's business services. When you lower corp tax rate from 35% to 20% "we would expect businesses of all types to come and invest, and when they do they need our services." Hmm. Did he see that WSJ segment with Cohn?? $T
— Diana Goovaerts (@DiaMariesbeat) November 16, 2017
In the last four months, AT&T has issued three separate press releases schilling the GOP’s tax plan, all with the same message: The current tax rate is unaffordably high, and the only thing stopping AT&T from giving every hard-working American a fantastic job is that 35% tax rate.
But according to independent analysis, AT&T already doesn’t pay anything close to that in corporate tax. From the NYT in August:
According to the Institute on Taxation and Economic Policy, AT&T enjoyed an effective tax rate of just 8 percent between 2008 and 2015, despite recording a profit in the United States each year, by exploiting tax breaks and loopholes. (The company argues that it pays significant taxes, at a rate close to 34 percent in recent years, but that includes deferred taxes and state and local levies.)
AT&T says that it “disagrees with [the] report and its findings,” and says that it has paid more than $100 billion in tax over the last 5 years. AT&T’s 2016 financial plan did claim that the company paid 32.7% in total effective tax, but even then, that report showed that the effective tax rate has been decreasing by about one percent since 2014.
Even if you take AT&T’s word that tax rates are too high, the promise that money saved via tax cuts is going to lead to investment and jobs is tenuous. A quick and unscientific poll of CEOs at a WSJ conference Tuesday showed the lack of enthusiasm:
https://twitter.com/nataliewsj/status/930477112808628226
More broadly speaking, there’s little evidence that corporate tax cuts leads to greater capital investment — especially since American companies are already sitting on a record $2.9 trillion of cash. Instead, companies are likely to use a tax break to issue dividends to shareholders or buy back their own stock, artificially boosting the price of the stock that executives are paid with. AT&T in particular has protected its dividend fiercely — it went up from 40 cents-per-share to 41 cents after the 2008 financial crisis, while workers were being laid off.
Speaking of AT&T’s pledge to create good, middle-class jobs, let’s take a moment to examine AT&T’s ongoing labor dispute. The company has been locked in a dispute with the CWA union for over 10 months, with disagreements over pay, benefits, and the outsourcing of jobs. Since 2011, the CWA alleges, AT&T has cut 12,000 call center jobs in the US to move them offshore. In the US, AT&T has also moved to replace full-time workers with contract employees. 17 US Senators even sent a letter to AT&T CEO Randall Stephenson, asking the company to reach an agreement with the CWA — something they say would be a concrete demonstration of AT&T’s “commitment to the American workforce.”
AT&T told BGR that “since the beginning of 2015 we’ve reached, and our union employees have approved, 32 fair labor agreements with the CWA and IBEW, covering about 145,000 employees.
Finally, let’s take a look at how AT&T has fared on some of its previous pledges to government agencies. Concessions — like a commitment to build out internet services to rural areas — are a common condition to the approval of telecoms mergers, but like other big telecoms companies, AT&T has a spotty record.
In return for its 2006 merger with Bell South, for example, AT&T was supposed to offer high-speed internet to every customer in its region by 2007. According to a report, that still hadn’t happened by 2012. AT&T now claims that it has met its merger commitment.
In return for AT&T’s 2015 merger with DirecTV, the company was supposed to offer GigaPower fiber to 12.5 million homes by 2019. An analysis last year suggested it would miss that goal, although the company says that it’s “already ahead” of its commitment to reach 5 million homes by the end of 2017.
Now, AT&T isn’t the only company that has a spotty relationship with making promises in return for regulatory concessions. But it should raise some doubts about the pledges AT&T is making about tax reform right now.
