US president Donald Trump’s ground-breaking tax reforms have released a wave of one-off bonus payments to employees and hourly wage rises since the legislation was signed off last year.
Payments include substantial contributions to leasing company staff and charitable foundations.
Americans for Tax Reform (ATR) estimates more than one million employees are in line for a bonus of between $1,000 and $2,000 and says more than 40 US companies have pledged to increase pay rates and increase charitable donations in the wake of Trump’s tax regime overhaul, which has slashed corporation tax from 35% to 21%.
Fifth Third Bankcorp, for example, has given $1,000 bonuses to 13,500 employees and put its base hourly wage up to $15, while PNC Financial Group has paid $1,000 bonuses to 47,500 employees, put an additional $1,500 in employee pension accounts, and pledged $200 million in charitable contributions.
BB&T has also pushed up its minimum hourly pay rate from $12 to $15, provided a special, one-time $1,200 bonus for almost three-quarters of its associates (about 27,000), most of whom do not receive incentives or commissions, and donated $100 million to its philanthropic fund, at a total cost to the company of $152 million.
Similarly, US Bancorp has handed out a $1,000 bonus for nearly 60,000 employees, raised the minimum wage to $15, and made a one-time $150 million charity contribution, as well as enhancing its employee healthcare package.
Andy Cecere, president and CEO of US Bancorp, said: “We believe that tax reform is positive for the US economy because it provides an immediate opportunity to benefit our employees, our communities and our customers.
“We are proud of our people and their commitment to our customers and communities. We felt it was important to reward their hard work and dedication.”
TCF Financial Corporation said that as a result of the Tax Cuts and Jobs Act, it will provide approximately $5 million in one-time bonuses to eligible team members - $1,000 to full-time team members and $500 to part-time team members - who earned less than $100,000 in total compensation during 2017, totaling 80% of its workforce.
Additionally, TCF will donate $5 million to TCF Foundation to increase grants to non-profit organizations in the communities it serves.
It is also revaluing its deferred tax assets and deferred tax liabilities to account for lower corporate tax rates and expects to record a one-time net tax benefit of between $120 million and $140 million.
However, investment bank Goldman Sachs is one of several multinationals to report that it will take a one-time hit on earnings as a result of the tax reforms, largely because of the introduction of a repatriation tax on assets held outside the US.
Goldman Sachs indicated it expected the changes to result in a reduction of approximately $5bn in the firm’s earnings for the fourth quarter and year ending December 31, 2017.
The bank is also skeptical about how successful Trump’s flagship reforms will be.
Republicans have predicted that they expect the new regime will boost US gross domestic product (GDP) growth by 0.4 percentage points a year going forward.
Two non-partisan groups have disagreed, with the Joint Committee on Taxation, which monitors Congress legislation, saying the bill will boost the annual growth rate by only around 0.08 points, while the Tax Policy Center estimates a rise of 0.002 points a year.
Goldman Sachs’, which estimates a 0.3 percentage point boost to GDP in 2018-19, stated in a briefing: “We note that the effect in 2020 and beyond looks minimal and could actually be slightly negative.”