Companies Are Handing Out Bonuses Thanks to the Tax Law. Is It a Publicity Stunt?

The big corporate tax break that became law last month is great news for companies and their investors. But what about employees? How much of the corporate tax windfall will go to workers via higher wages?

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, New York Times

The big corporate tax break that became law last month is great news for companies and their investors. But what about employees? How much of the corporate tax windfall will go to workers via higher wages?

Since President Donald Trump signed the $1.5 trillion tax cut into law on Dec. 22, nearly 20 large companies have announced some form of bonus or wage hike for their employees. Will they make a difference? Or are they merely publicity stunts?

“This is not a PR stunt,” said Teresa Tanner, who oversees marketing and human resources at Fifth Third Bank, a regional lender in the Midwest that is raising its minimum wage and giving some employees a $1,000 bonus. “The tax cut will be an ongoing benefit for us and we wanted to share this with our employees. It is the right thing to do.”

Many of the large companies that have announced fatter future paychecks are also subject to close regulatory scrutiny. Among them: AT&T, which was one of the first companies to publicly announce plans to reward employees with a one-time bonus. The company is also wrestling with Trump’s Justice Department, which has blocked its planned merger with Time Warner.

For most large companies, experts believe that the proceeds of the big tax cut will largely go toward paying for companies to repurchase their own shares, a tactic that tends to boost stock prices. The new law will drop the corporate income tax rate to 21 percent from 35 percent and usher in other big side benefits.

Economists and analysts expect much less of the tax winnings to go to permanent pay increases for employees, who, as a whole, have endured stagnant wages over the past decade. That’s especially true for larger companies.

“The majority of these funds will go to shareholders,” said Jeffrey A. Sonnenfeld, a dean of leadership studies at the Yale School of Management.

For smaller companies, which have been experiencing a boom in the past year, wages have been marching higher, due partly to higher demand for increasingly scarce workers. These smaller companies have been quietly hiring workers, even if they’re not trumpeting one-time tax-related bonuses.

“Our companies have been raising compensation for a year now,” said Bill Dunkelberg, chief economist for the National Federation of Independent Business, a trade group for small businesses.


Amount: $1,000 bonus

Affected Employees: More than 200,000

Back story: The telecommunications giant was among the first companies to announce a benefit for its workers on Dec. 20, after the bill cleared Congress but two days before it became law. AT&T’s bid to merge with Time Warner has been blocked by the Justice Department.

Fifth Third Bancorp

Amount: An increase in the minimum wage to $15 and a $1,000 bonus.

Affected Employees: 13,500 employees for the bonus. 3,500 for the wage hike.

Back Story: Fifth Third is a large regional bank based in Cincinnati that caters to clients in the Midwest and Southeast. Many of its customers are small business owners who have supported Trump’s economic agenda.

Southwest Airlines

Amount: $1,000

Affected Employees: To be awarded to every full-time and part-time employee. Southwest employs 53,500 workers.

Back Story: The airline announced the moves on Jan. 2. Chief Executive Gary Kelly said the company will donate an additional $5 million to charitable causes and increase purchases of planes from Boeing, the American jet maker, as a result of the tax cut.

Wells Fargo

Amount: An increase in its hourly wage to $15 per hour.

Affected Employees: The bank’s total head count is 268,000

Back Story: Wells Fargo is one of the country’s top banks — and has been dogged in recent months by repeated scandals involving its customers. Trump took a swing at the bank last month, saying it would remain under government scrutiny. The bank said that it would be donating $400 million to community organizations in 2018.


Amount: $300 million in spending on employees

Affected Employees: Boeing employs about 147,000 people

Back Story: The spending by the air giant would include increased corporate giving and more training and education for employees.


Amount: $1,000 bonus

Affected Employees: More than 100,000 nonexecutive employees.

Back Story: The media and telecommunications colossus also said that it would spend more than $50 billion over the next five years on infrastructure, broadband capacity and its theme park and entertainment offerings.

American Airlines

Amount: $1,000 bonus

Affected Employees: American employs over 113,000 people. Officers at the company will not get a payment.

Back Story: The airline industry is also subject to close federal scrutiny. American’s chief executive, Doug Parker, said the company would spend $130 million on the bonus, which will be distributed in the first quarter of this year.

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