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From the article this statement is responding to: > Companies that make up the S&P 500 index had an average effective tax rate of 18.1 percent in 2018, down fr
by sxyuan 7y ago
From the article this statement is responding to:
> Companies that make up the S&P 500 index had an average effective tax rate of 18.1 percent in 2018, down from 25.9 percent in 2016, according to an analysis of securities filings. More than 200 of those companies saw their effective tax rates fall by 10 points or more. Nearly three dozen, including FedEx, saw their tax rates fall to zero or reported that tax authorities owed them money.
> From the first quarter of 2018, when the law fully took effect, companies have spent nearly three times as much on additional dividends and stock buybacks, which boost a company’s stock price and market value, than on increased investment.
This is concrete, relevant data (unlike the argument made by the FedEx CEO, as others have already mentioned). I'm curious if anyone in the pro-Fedex crowd can provide evidence to the contrary.
The increasing share of wealth that is moving from the bottom 90% into the hands of the top 1% in the US is a real concern to me. And I suspect a big part of that has to do with the recent trend of stock buybacks and dividend increases, which benefits shareholders and not workers. How many people in the bottom 50% (or even 90%) actually own a significant amount of stock, do you think?
The first source I found on this topic states: [1]
In 2016, American households headed by someone aged 32-61 averaged $120,809.40 in retirement savings, or $264,453.30 using an expansive calculation. Using the same calculations and definitions, American households have a median of $7,800 and $17,000 saved, respectively.
[1] https://dqydj.com/retirement-savings-average-median-percentile-united-states/ https://dqydj.com/retirement-savings-average-median-percenti...
- appleiigs 7y agoInvestors have stock. Dividends and stock buybacks move idle cash out of the corporation and back into the hands of investors. Investors now have cash instead of stock. Those investors are better at distributing cash to good investments than Fedex or Apple or Google is. The cash doesn't get redistributed from the non-1% to the 1%. The idle cash that corporations have aren't generating jobs.
- Majromax 7y ago> The idle cash that corporations have aren't generating jobs. But that contradicts the claimed raison d'être for the 2018 tax cut: that corporate direct investment was being restrained by corporate income taxes. A call to lower corporate income taxes so more money could flow to investors would have been consistent, both with economic orthodoxy and with the observed outcome.
- appleiigs 7y ago> more money could flow to investors Is that a bad thing? I'm thinking it is good. Why do people want higher taxes for? I'm thinking lower taxes reduces the amount of money going to the government is good. The government is horribly inefficient due things such as bureaucracy, corruption, etc. No matter where they operate, it hasn't been good. Whether it's US or China, the gov't is not where I think money should go.
- mthoms 7y ago>No matter where they operate, it hasn't been good. That's what the rich hand powerful want you to think. But the facts don't support it. Look at any of the other top western democracies. You know, the ones with longer lifespans, more upward mobility, happier populations, better infrastructure, better education, and so on. I'm not suggesting that those countries are perfect or that there aren't gross inefficiencies, but the widespread belief that good government is basically impossible, so why even try is mostly an American (right wing) phenomenon. Other top-tier western style democracies, despite their many imperfections, are doing just fine.
- appleiigs 7y agoWestern societies have been more democratic... and more capitalist. If you take high taxes to the extreme (eg. eliminate all billionaires like Bernie Sanders recommends), you get closer to communism which hasn't done as well.
- mthoms 7y agoI'm not even sure what you're arguing anymore. Communism is bad? I agree. It does nothing to support your assertion that any and all governments are inherently bad.
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- 7y ago
- aguyfromnb 7y ago>I'm curious if anyone in the pro-Fedex crowd can provide evidence to the contrary I'm not sure I'm "pro-Fedex", but: "stock buybacks, which boost a company’s stock price and market value" Stock buybacks do not increase the company's market value. Cash goes out, stock comes in. Balance sheet is the same. My second point would be: is 2 years long enough to determine the effects of the tax cut? Companies the size of Fedex can't make massive changes to budgets overnight.
- hef19898 7y agoMarket value of public companies is not determined by the balance sheet but by the stock price multiplied by the number of share. Buybacks reduce the number of shares and by increasing demand increase the price per share. In the first step, the market value is a constant, taking out the number of shares thus increases directly the share price. Which are than further increased by increased demand and increasing the market value as now the number of shares is constant. So yes, buy backs directly increase the market value. Why else would companies do them? They also have the nice side effect of increasing the value of execs' stock options, again a nice motivation for a CEO to do a buyback.
- s1artibartfast 7y agoDemand for stock is not determined by the number of outstanding shares.
- hef19898 7y agoNope. But buying back large amount of shares is driving prices by reducing the number of shares and increasing demand.
- s1artibartfast 7y agoBuybacks are routinely priced above the list prise to ensure sales. Once the buyback occurs, the only change in corporate value should reflect the improved financial fundamentals of the company.