The Selfish Agenda of Six Pro-Tax Cut Corporations
“Tax cuts create jobs.” How many times have we heard this from corporate spokespeople and their allies in the U.S. government? They recited the same line in 2017 with the Tax Cuts and Jobs Act (TCJA), which slashed the corporate tax rate from 35 to 21 percent when it took effect in January 2018.
Do corporations really use the money they save from tax cuts to create jobs? Six corporations were among the most vocal advocates for the tax cuts: Apple (consumer electronics), FedEx and UPS (delivery services), Lockheed Martin, (aerospace products), Eli Lilly (pharmaceuticals), and Stryker (medical devices).
Several months before Trump signed the TCJA into law, reporters from TYT Investigates asked executives at these corporations how many jobs they believed they could create with the money they would save. None of them responded with a straight answer.
What TYT Investigates discovered were plans for stock buybacks, dividend increases, automation, offshoring, and outsourcing–plans that would only benefit executives and boards of directors while leaving workers unemployed or underemployed.
QUICK FACTS
- All six corporations in TYT’s investigation raise stock dividends and buy outstanding shares of stock, resulting in increased executive compensation. Learn more
- FedEx, UPS, and Eli Lilly have invested in automation to reduce their paid staff. Learn more
- Apple, Eli Lilly, and Lockheed Martin open plants in countries where taxes are even lower than in the U.S. Learn more
- Apple, UPS, Lockheed Martin, and Eli Lilly outsource jobs to lower-paid workers and merge with other corporations, resulting in job cuts. Learn more
- Get involved
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All six corporations in TYT’s investigation raise stock dividends and buy outstanding shares of stock, resulting in increased executive compensation.
Buybacks: A buyback or share repurchase is when a company buys its own outstanding shares to reduce the number of shares available to the open market. Reasons for buy backs include to increase the value of remaining shares, keeping other shareholders from a controlling stake.
Dividends: A dividend is the distribution of some of a company’s earnings to a class of its shareholders as determined by the company’s board of directors & may be paid out as cash or in the form of additional stock.
The effective tax rate for Apple in 2016 was 25.6% compared to 21.0% in 2020. That difference amounts to over $12.6 billion in tax savings for 2020 alone.
- Additionally, Apple pays out over $13 billion in dividends annually, and Apple CEO Tim Cook made $8.7 million in 2016.
FedEx’s effective tax rate in 2016 was 33.6% compared to 23.0% in 2020, for a total tax savings of over $7.3 billion over four years.
- The company paid out $227 million in dividends in fiscal year (FY) 2016.
- CEO Fred Smith, whose total compensation actually decreased by $1.2 million from FY 2016 to FY 2017, told CNBC in October 2017 that FedEx would use its tax cuts to increase dividend payouts for FY 2017.
- On the final FY 2017 earnings call, CFO and Executive Vice President Alan Graf stated the company had “approximately 16 million remaining shares authorized for repurchase” and projected a 25-percent rise in dividends to $0.50 per share per quarter for FY 2018.
- Dividends for FY 2017 were $0.40 per share, a 60% increase from FY 2016.
UPS had an effective tax rate of 36.9% compared to 27.2% in 2020, saving the company over $8.2 billion in 2020 alone.
- In FY 2016, the company paid out $2.8 billion in dividends and expected to increase dividends for FY 2017 due to the tax cuts.
- On its final FY 2017 earnings call, CFO Richard Peretz stated that UPS had paid out $2.9 billion in dividends and “repurchased more than 16 million shares [of UPS stock] for about $1.8 billion.”
- CEO David Abney received $13.7 million in March 2017, a 20% increase from 2016.
Lockheed Martin’s effective tax rate in 2016 was 23.2% compared to 16.4% in 2020. That difference amounts to over $4.45 billion in tax savings for 2020 alone.
- In 2017, Lockheed Martin Corporation (LMT) reported $5.3 billion in profits. At the close of the first quarter of 2021, its net sales were $16.3 billion with “[n]et earnings of $1.8 billion, or $6.56 per share.”
- In the same year, the LMT board of directors increased their authority to repurchase shares by $2 billion, making their total share repurchase of common stock authority at approximately $4 billion.
Eli Lilly’s effective tax rate in 2016 was 18.9% compared to 14.3% in 2020. That difference amounts to over $1.1 billion in tax savings for 2020 alone.
- For FY 2020, the company paid out just under $2.7 billion in dividends, or $2.96/share, an increase of 15% compared to 2019.
- Eli Lilly paid CEO David Ricks $23.7 million in 2020, 233 times the median employee salary at Eli Lilly. This is an 11% increase from 2019.
Stryker had an effective tax rate of 17.3% in 2016 compared to 12.6% in 2020, saving the corporation $675 million in 2020 alone.
- The company paid out $324 million in dividends in 2016. In 2017, Stryker repurchased about 230 million shares of stock in FY 2017.
- Its per-share earnings claim was $1.96 in the fourth quarter, for a 12% gain to $6.49 for the fiscal year.
CEO Kevin Lobo’s total compensation rose from $12.8 million in 2016 to over $14 million in 2017, a 9% gain.
FedEx, UPS, and Eli Lilly have invested in automation to reduce their paid staff.
In 2018, over 130 of FedEx’s facilities were fully automated as a result of the tax cuts.
- At the time, the company was already using self-driving tuggers. FedEx was also testing driverless delivery trucks, a robot for same-day deliveries, mobile robots, anti-collision sensors, automated unloading, and wirelessly connected trailers.
- Additionally, its Drones, Robotics, and Navigation Enabled Systems (DRONES) initiative had invested approximately $23 million in automated technology between 2003 and 2017.
At the time of TYT’s investigation, UPS had planned to invest over $500 million in automation at its Atlanta, Columbus, and Jacksonville, FL plants, using its highly automated Worldport plant in Louisville, KY as a model. By 2017, UPS was already using delivery drones. UPS defines equipment as automated when human hands touch packages no more than twice.
Both UPS and FedEx were still relying on some human effort in their automated systems as of October 2017, although they were still researching and applying for patents in automating their conveyor belts, loading and unloading systems, and imaging. They envision fully driverless vehicles gaining dominance by the late 2020s. 1 | 2 | 3 | 4 | 5
Eli Lilly, whose employee count has declined by 16.6% since 2016, designed a new robotic lab as part of a $90 million investment made in 2017 to expand Lilly’s research footprint–without increasing the number of employees. The company invested in 27 new robots as part of automating its COVID-19 testing process.
- “It represents an area where you can dramatically reduce certain kinds of personnel … which would normally be sitting at a bench doing those repetitive tasks,” according to Robert F. Murphy, who teaches computational biology and biomedical engineering at Carnegie Mellon University in New York.
Apple, Eli Lilly, and Lockheed Martin open plants in countries where taxes are even lower than in the U.S.
Apple has been outsourcing its manufacturing to overseas partners since the early 2000s.
- As of October 2017, it had five subsidiaries in Ireland and paid less than 2% in taxes on its Irish profits.
- After an inquiry before a Senate subcommittee in May 2013, Apple moved its profits to Jersey, an island in the English Channel that almost never requires companies to pay corporate income tax.
- The TCJA lowered taxes on profits that all corporations earned abroad, as well as within the United States. Originally 35%, taxes in 2018 sank to 15.5% on cash and 8% on non-cash assets. Apple’s windfall from overseas for that year was almost $250 million.
Eli Lilly has steadily increased its percentage of employees working outside the U.S. since the Bush tax cuts of 2001, when 19,100 of its 41,100 employees (46.5%) worked overseas.
- In 2016, this figure climbed to 23,115 out of 41,975 employees (55.1%).
- As a result of the TCJA, the proportion of offshore employees in 2020 rose to 19,500 (55.7%) out of its total workforce of 35,000.
In the same 2015-2016 period when Lockheed Martin cut 30,000 jobs, several significant operations of theirs in the US disappeared from the corporate reports, indicating a shift offshore. The company has been untouched by tax burdens, becoming more profitable each year.
- Meanwhile, operations are expanding in Italy, the UK, Israel, Japan, India, Saudi Arabia, Canada, Singapore and Australia.
- Their F-16 production has shifted to India, which Lockheed Martin boasts was supported by both Obama and Trump.
Japan and Italy appear to be doing the manufacturing of the F-35.
Apple, UPS, Lockheed Martin, and Eli Lilly outsource jobs to lower-paid workers and merge with other corporations, resulting in job cuts.
Apple outsources its manufacturing to a number of other companies.
- Two of them are Foxconn, which produces mobile devices (iPhone, iPad, iPod, and Apple Watch), and Corning, which produces the glass for iPhone displays.
- Although Apple invested over $200 million with plans to expand operations at the Corning plant in Harrodsburg, KY in April 2017, that plan never came to fruition.
- In its 2018 annual 10-K filing with the SEC as well as in its 2020 filing, Apple notes that “all of [its] hardware products are manufactured by outsourcing partners that are located primarily in Asia, with some Mac computers manufactured in the U.S. and Ireland.”
Despite UPS workers’ demand for 15,000 full-time positions for current part-timers, the company outsourced full- and part-time positions to independent contractors, subcontractors, and students at the high school and college levels. 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13
- One independent contractor position was for seasonal (temporary) package delivery.
- All of these positions paid lower hourly wages than permanent positions.
In 2015 Lockheed Martin acquired Sikorsky, the American Black Hawk helicopter manufacturing company, for $9 billion. Sikorsky had about 15,000 employees at the time. From 2016 to 2017, Lockheed laid off 310 Sikorsky employees. This coincides with the period in which Lockheed eliminated 30,000 of its own jobs. 1 | 2 | 3
- The Sikorsky layoffs spurred litigation for wrongful termination and whistleblower suits as claims arose that employment assessments breached FAA regulations and the destruction of incriminating corporate records.
Eli Lilly had planned on downsizing as early as 2007, having already outsourced 40% of information technology, 20% of manufacturing, almost 20% of U.S. sales, and most support functions such as security and food services. By 2020, spending on R&D was about 25% of revenue.
Original Research: Jonathan Larson
Fact Sheet Contributors: Bryce Platt, Jessica C., Michael Fredenburg, Rick Young
Graphic Designer: Lena Plaut
Editors: Jessica Cresseveur, Alison Hartson
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