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Surprise! AT&T and Verizon pocket huge tax breaks, employ fewer people

Published Dec 15th, 2014 2:00PM EST
AT&T Verizon Tax Breaks

This may shock you, but giving large companies special tax deals doesn’t magically lead to full employment and economic paradise. The Wall Street Journal reports that both AT&T and Verizon started receiving huge tax breaks starting in 2008 as part of a stimulus package and since then have actually reduced their combined employee counts by around 100,000 people.

RELATED: It’s official: AT&T and Verizon are feeling the heat from T-Mobile and Sprint

The particular tax break in question is known as “bonus depreciation” and it essentially allows companies to more quickly offset their total income with the money they invest in doing things like building factories or upgrading their networks. The idea behind it is to give the companies an incentive to continue making critical infrastructure investments and thus create more jobs than they normally would have during a down economy.

It’s fair to point out, of course, that these tax breaks were enacted at the start of the Great Recession and that AT&T and Verizon may have reduced their workforces by even greater numbers without them. And in AT&T’s case, a lot of the net job losses were the result of asset sales, so it’s not as though the company instituted massive layoffs right after getting its tax breaks. And it’s also fair to note that Verizon and AT&T were creating jobs among third-party vendors when they invested in infrastructure improvements.

All the same, these numbers do make you question whether these tax breaks were really worthwhile because they were absolutely massive — AT&T, for instance, paid a total tax bill of $3 billion last year versus a tax bill of almost $6 billion in 2007. Verizon, meanwhile, actually got a refund of $197 million last year versus the $2.6 billion tax bill it paid in 2007.

“The Congressional Research Service concluded in a report in October that bonus depreciation ‘did not appear to be very effective in providing short-term economic stimulus compared with alternatives,'” the Journal notes. “The results echoed those of a study published by the Federal Reserve in 2006 that found bonus depreciation had ‘only a very limited impact’ on investment spending.”

Read the Journal’s full analysis by clicking the source link below.

Brad Reed
Brad Reed Staff Writer

Brad Reed has written about technology for over eight years at and Network World. Prior to that, he wrote freelance stories for political publications such as AlterNet and the American Prospect. He has a Master's Degree in Business and Economics Journalism from Boston University.