business news in context, analysis with attitude

Content Guy’s Note: Stories in this section are, in my estimation, important and relevant to business. However, they are relegated to this slot because some MNB readers have made clear that they prefer a politics-free MNB; I can't do that because sometimes the news calls out for coverage and commentary, but at least I can make it easy for folks to skip it if they so desire. And, as always, brief, occasional and sometimes gratuitous commentary is italicized…

• The New York Times over the weekend reported that in 2018, FedEx paid no federal taxes, despite the fact that a year earlier it paid $1.5 billion in taxes.

The reason: "The Trump administration’s tax cut - for which the company had lobbied hard." FedEx founder/CEO Fred Smith had championed the tax cuts, the story says, saying that they would "make the United States a better place to invest," which would lead to "a renaissance of capital investment."

However, it hasn't quite worked out that way.

From the Times story: "A New York Times analysis of data compiled by Capital IQ shows no statistically meaningful relationship between the size of the tax cut that companies and industries received and the investments they made. If anything, the companies that received the biggest tax cuts increased their capital investment by less, on average, than companies that got smaller cuts."

FedEx, the Times reports, "spent less in the 2018 fiscal year than it had projected in December 2017, before the tax law passed. It spent even less in 2019. Much of its savings have gone to reward shareholders: FedEx spent more than $2 billion on stock buybacks and dividend increases in the 2019 fiscal year, up from $1.6 billion in 2018, and more than double the amount the company spent on buybacks and dividends in fiscal year 2017."

FedEx argues that "it was unfair to judge the effect of the tax cuts on investment by looking at year-to-year changes in the company’s capital spending plans … 'FedEx invested billions in capital items eligible for accelerated depreciation and made large contributions to our employee pension plans,' the company said in a statement. 'These factors have temporarily lowered our federal income tax, which was the law’s intention to help grow G.D.P., create jobs and increase wages'."

I bring this up because it sounds a lot like a political football in the making, especially in a presidential election year. Businesses - including retailers - need to know that there may be a lot of attention paid to how much they are paying in taxes, and whether tax savings are being spent in capital investments and hiring, or on stock buybacks and investor dividends.

I'm just saying that you may need to be ready to answer the question if you are used as an example in a public policy debate. You can read the entire Times story here.

KC's View: