DawgTalkers.net Forums DawgTalk Palus Politicus How FedEx Cut Its Tax Bill to $0

of Course, conservatives will tell us libs that fedex still pays way too much in taxes, and need a cut.

https://news.yahoo.com/fedex-cut-tax-bill-0-165617720.html

WASHINGTON — In the 2017 fiscal year, FedEx owed more than $1.5 billion in taxes. The next year, it owed nothing. What changed was the Trump administration’s tax cut — for which the company had lobbied hard.
The public face of its lobbying effort, which included a tax proposal of its own, was FedEx’s founder and chief executive, Frederick Smith, who repeatedly took to the airwaves to champion the power of tax cuts. “If you make the United States a better place to invest, there is no question in my mind that we would see a renaissance of capital investment,” he said on an August 2017 radio show hosted by Larry Kudlow, who is now chairman of the National Economic Council.
Four months later, President Donald Trump signed into law the $1.5 trillion tax cut that became his signature legislative achievement. FedEx reaped big savings, bringing its effective tax rate to less than zero in fiscal year 2018 from 34% in fiscal year 2017, meaning that, overall, the government technically owed it money. But it did not increase investment in new equipment and other assets in the fiscal year that followed as Smith said businesses like his would.
Nearly two years after the tax law passed, the windfall to corporations like FedEx is becoming clear. 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’s financial filings show that the law has so far saved it at least $1.6 billion. Its financial filings show it owed no taxes in the 2018 fiscal year overall. Company officials said FedEx paid $2 billion in total federal income taxes over the past 10 years.

As for capital investments, the company 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 has 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.
A spokesman said 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 GDP, create jobs and increase wages.”
FedEx’s use of its tax savings is representative of corporate America. Companies have already saved upward of $100 billion more on their taxes than analysts predicted when the law was passed. Companies that make up the S&P 500 index had an average effective tax rate of 18.1% in 2018, down from 25.9% 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.
The law cut the corporate rate to 21% from 35% and allowed companies to deduct the full cost of new equipment investments in the year that they make them. Those cuts stimulated the U.S. economy in 2018, helping to push economic growth to 2.5% for the year and fueling a boost in hiring. Business investment rose at an 8.8% rate in the first quarter of 2018 and was nearly as strong in the second quarter.
But the impact dwindled quickly.
In the summer, the economy grew at just 1.9% and business investment fell 3%, including a 15.3% plunge in spending on factories and offices. Over the spring, companies spent less on new investments, after adjusting for inflation, than they had in the winter.
Overall business investment during Trump’s tenure has now grown more slowly since the tax cuts were passed than before.
Some conservative economists and business leaders said the effects of the tax cuts were undercut by uncertainty from Trump’s trade war, which is slowing global growth and prompting companies to freeze projects. Other economists said the fizzle is predictable because high tax rates were not holding back investment.
“It did provide a short-term boost, but it wasn’t the big response that many people expected,” said Aparna Mathur, an economist at the conservative American Enterprise Institute, who recently concluded that the 2017 law has not meaningfully changed investment patterns in the U.S.
Smith, 75, a former Marine who built FedEx from a small package delivery service into a global logistics giant, was no stranger to pressing for lower taxes. He tried, without success, to get President Barack Obama to cut the corporate rate. But with Trump’s ascension, the corporate chief began a one-man campaign to convince Washington that now was the moment. He met with the president-elect at Trump Tower on Nov. 17, just days after the election, and appeared alongside the president at official events.
In a conference call with analysts the month after Trump’s election, Alan Graf, FedEx’s chief financial officer, called the prospect of a 20% corporate tax rate “a mighty fine Christmas gift.”
Smith teamed up with his competitor, David Abney, chairman and chief executive of UPS, to push for a tax overhaul, including jointly writing an op-ed in The Wall Street Journal.
“Fred and I even jointly had some meetings about this with key people, and we were both pushing pretty hard,” Abney said in a recent interview.
FedEx spent $10 million on lobbying in 2017, in line with previous spending, with much of it focused on tax issues, according to federal records. Its team pushed hard to shape the bill behind the scenes, meeting regularly with House and Senate committee staff who were writing the provisions.
Smith met with Trump and Vice President Mike Pence in February 2017, and on May 26 he spoke on the phone with Steven Mnuchin, the Treasury secretary, according to Mnuchin’s public calendar.
Eight months after Congress passed the law, Trump celebrated the tax cuts by hosting Smith and other business leaders at a dinner at his Bedminster, New Jersey, golf club. He singled out Smith several times, bantering with him about a term paper that Smith had written while a student at Yale. The paper formed the basis for the creation of FedEx.
The next week, Smith boasted of his company’s influence on the law in the company’s annual report, which noted that FedEx is “investing more than $4.2 billion in our people and our network as a result of the tax act.”
FedEx increased the size of its workforce by around 4% in its 2018 fiscal year and around 7% in its 2019 fiscal year.
The company also accelerated a previously scheduled wage increase for hourly employees by six months. It gave performance-based pay to other managers and said it would invest $1.5 billion over seven years in its Indianapolis shipping hub. The company also bought 24 Boeing freight jets for $6.6 billion, a purchase officials say would not have happened without tax cuts.
But the company ended its 2018 fiscal year having spent $240 million less on capital investments than it predicted it would in December 2017, shortly before the tax cuts passed. The company’s capital spending declined by nearly $175 million in fiscal 2019.
This year, the company cut back employee bonuses and has offered buyouts in an effort to reduce labor costs in the face of slowing global growth. The company has also added to its pension fund, a move that carried the benefit of reducing its tax liability even further.
FedEx reduced its tax liability in part by taking advantage of a provision in the law that allowed companies to immediately deduct the value of any capital investments they make in a given year. But its biggest gains were from the cut in the corporate rate. FedEx had been carrying a large amount of future tax liabilities on its balance sheet — and when the corporate rate fell to 21%, those liabilities shrank, too.
“Something like $1.5 billion in future taxes that they had promised to pay just vanished,” said Matthew Gardner, an analyst at the liberal Institute on Taxation and Economic Policy in Washington. “The obvious question is whether you can draw any line, any connection between the tax breaks they’re getting, ostensibly designed to encourage capital expenditures, and what they’re actually doing. And it’s just impossible to know.”

Pfft ..the trump era

Would you say we've had a "renaissance of capital investment?"

Companies have been taking advantage of loopholes in the tax system long before trumps tax cuts. Ask Obama how much GE paid in taxes under his plans.

Agreed.
This doesn’t change that what trump did was unnecessary and has made FedEx wealthier while paying less into the system that is supposed to help us all.

Actually, FedEx is not wealthier - Amazon has killed them recently and they have taken mad losses.

You views on the tax cuts aside, it doesn't change the fact that trying to lay a company not paying taxes on trumps feet is well.....exactly why people call things TDS.

FedEx wasn't going to pay taxes no matter what system was in place - Obamas or Trumps. lol

Typical cop out. That’s BS.

This is from their report:

On revenue of $65.5 billion
Operating income of $5.73 billion
Net income of $4.17 billion
All up nicely from 2017....



So they themselves state that at least $1.6 billion of their $2.1 billion in tax savings is DIRECTLY ATTRIBUTABLE to the 2017 tax and jobs act.

Some people never seem to let facts get in the way of feelings and opinions.

All you guys claiming you actually saw a tax savings, how do you like your crumbs? Two Trillion dollars to the neediest wealthy people and businesses in the country and we got bupkis!

A corporate AMT is not a bad idea.

j/c

Does anyone understand why they paid $0 taxes? They did not have ANY taxable income. The 21% tax on zero taxable income equals zero.

So the real question is...how did they have zero taxable income? They bought equipment and expensed that equipment until their taxable income was...wait for it...zero. The article even tells you that.

The equipment they bought was built by an entity somewhere and THAT/THOSE entities had more business - creating more taxable income for THAT/THOSE entities. More taxable income at 21% equals more $$$ to the Treasury.

The new equipment helps FedEx compete and...wait for it...be more profitable in the future...when they will...wait for it...have higher taxable income that will be taxed at 21%.

If your business made $50,000 and THEN bought $50,000 worth of new equipment...you too could have zero taxable income. Zero x 21% = Zero. If you knew that buying that $50k in equipment would help your cash flow by creating a tax break in that year, you would be more likely to buy that equipment. Math is a funny thing. Business owners understand math, taxes and cash flow.

This is a good thing...not a bad thing.

It already exists. FedEx very-well may have incurred corporate AMT. If they did, articles like this will conveniently and selectively refer ONLY to regular income tax. If corporate AMT applies, they will not state so. They will harp on the ZERO tax - meaning regular income tax without clarification.

This happens all the time with individual taxpayers as well.

The facts are on their quarterly call they have stated there was a 1.5 billion shortfall this fiscal year.

I would check your facts first, buddy boy.

FedEx gave dismal numbers for the second straight quarter, citing multiple factors. One of which was the troubling acquisition of TNT Express in Europe.

They just had a HUGE buyout earlier this year, and have cut their employees incentives for next year already.

But keep posting things from 2017 and 2018, thinking they mean anything today. . . . . .

Is that you John Dorsey? Or just a wannabe?

The corporate tax cut has ZERO to do with taxable income.

35% of 0 = 0
21% of 0 = 0

The demon lies in the details... In 2008 Obama fought to include a depreciation bonus as part of the stimulus package. It was a great idea - then, and should have ended (in 2011, I believe).

Corporations have lobbied hard to keep it intact. In the Tax Cuts and Jobs Act of 2017, these 100% depreciation bonuses were renewed through 2023. It allows corps like Fedex to invest in infrastructure and forego a normal depreciation schedule. It also allows a mom & pop beverage store to do the same.

I invested in a lot of new equipment during the Obama Administration because it was a true "bonus"... A direct write-off that still allowed you to schedule normal depreciation of equipment. Everything I bought was literally 65% off and still carried a depreciation deduction for the life of the equipment.

Anyone taking advantage of this now loses the normal depreciation schedule. Fedex is taking profit and reinvesting in it's future. You can blame it all on Trump, but it's been going on for over a decade.

The thing is I don’t give two craps who it started under.

billion dollar corporations should not be paying nothing in taxes.

I agree 100%. It was a genius way to stimulate the economy when we needed it. The vultures latched on and won't let go. There were reps on both sides of the aisle complaining they would lose funding and support if it wasn't renewed.

Nothing changes in the least til we take corporate money out of politics... no side seems to want that so we all lose. Every dollar they don't pay is one that you and I do.

Burn this thing down and start all over.

Ok cowboy..blow it up. That’s so realistic. the trump era pfffft.

More realistic than your go-to "Trump era pffft" to blame and complain about everything right down to the weather forecast.

Let's do nothing... just blame Trump!

They bought equipment needed to run their business. Should they not be allowed to deduct the cost of that equipment from their income?

Billion dollar corporations do not pay zero tax based on some elusive loophole. There are legit and legal reasons why tax returns end up the way they do. Now, if you want to discuss moving business and income out-of-the country to avoid taxes, that'd be a fun discussion...and that's exactly why Trump asked-for and got a tax rate reduction to 21% (to discourage moving profits overseas)...21% of something equals more tax dollars than 35+% of nothing.

billion dollar corporations should not be paying zero in taxes.

Should they be allowed to deduct the cost of equipment they use to create those billions of dollars?

should billion dollar corporations be spending millions to lobby for a tax cut that saves them billions?

why couldnt they use all that money they save to cover the expenses of equipment?

billion dollar corporations should not being paying zero in taxes.

In order:

Trying to cut a tax liability is a smart thing to do. Less taxes paid out means more investment and higher dividends to the stockholders.

They do. They use the tax savings to help mitigate the cost to buy equipment.

Basic math disagrees with you.

Now...

On what non-existent schedule or basis should a billion dollar company pay income tax when their income is zero?

i didnt say it wasnt smart, nor implied anything else.

billion dollar corporations should not being paying zero in taxes. the tax laws needs to change.

i understand you support your corporate slave masters. i do not. we wont see eye to eye on this whatsoever.

At some rate, yes. I'm not going to pretend to understand corporate taxes well enough to tell you what does/doesn't or should/shouldn't go into a company as big as FedEx doing their taxes...

But what I am comfortable saying is that those who DO KNOW what goes into it for FedEx, GE, Amazon, etc... are FAR SMARTER about it than the politicians they are lobbying to write the corporate tax codes.. and, to put it quite simply, the politicians are getting played...

FedEx stock price is way down, in some ways they have taken a beating... maybe FedEx, at this moment, isn't the best example.. doesn't change the overall premise of the conversation that these corporations are writing their own tax policy.... which is about as stupid as allowing the medical industry, big pharma, and the insurance companies to write their own healthcare act...

Across the board, energy industry, healthcare industry, every industry... the people WITHIN the industry know more about it than the politicians they own.. and they are acting in bad faith to lobby for laws and regs that benefit their own self interest even if it is to the detriment of everybody else..

Because most politicians are not that bright.

Why do you insist on going there? BOLDED above. Corporate slave masters...my goodness. Where did I support anything in this discussion? I have no interest in trying to see eye-to-eye with you.

I'm trying to help you understand why they paid zero dollars in income tax...on net income of zero. Shame on me.

No doubt. I do this stuff for a living but I have very little idea what a corp like FedEd does in their tax realm.

However, the deduction for equipment has always existed. The length of time to take that deduction has changed a great deal over the years. In FedEx' case, they chose to deduct equipment in the year acquired rather than over a seven year period that would otherwise apply. That option has been around for a long time in some shape or form.

The deduction is limited to the cost of the equipment. There is no provision to get to deduct more than what was paid. The only difference is timing.

The option was first created - and still gets used today - to encourage businesses to re-invest...grow...improve (I realize you probably understand this.) That growth generates more income which generates more tax $$$.

I don't recollect Big Corps lobbying for such a thing. I do recollect the government telling us this is a way to stimulate the economy.

At the micro level where I play in this game, my clients are ABSOLUTELY swayed by the immediate-deduction-option when buying equipment. Tax savings TODAY are huge for small businesses trying to keep up and/or expand.

I'd be willing to wager that you and I understand this issue/opportunity better than many politicians do...and in the grand scheme of things, this is a very , very simple concept compared to the things that get lobbied-for.

That's definitely part of the discussion. Obama lobbied for a reduction of the corporate tax rate in 2011 for the same reason:

Over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries. Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense, and it has to change. So tonight, I’m asking Democrats and Republicans to simplify the system. Get rid of the loopholes. Level the playing field. And use the savings to lower the corporate tax rate for the first time in 25 years – without adding to our deficit. It can be done.

Backtrack to 2004, congress enacted the last big Tax Holiday with the American Jobs Creation Act of 2004 (AJCA). It allowed 365 billion to "come home"... repatriated (sounds patriotic, doesn't it?) money to help create jobs. Tax rate was reduced from 35% to 5%. Imagine making 30% on your money, with taxpayers paying the dif! That money largely went to shareholders and stock buy-back and resulted in 20,000 lost jobs. Seems like these guys play fair, let's give them more loopholes... like this perfect example with FedEx, made possible by abolishing traditional depreciation and letting them take the discount whenever they want. Just one more tool to manipulate their tax liability.

And yet our leaders pat us on the head like "understanding" is above our pay-grade... They tell us it's "complicated".

Not complicated at all... Comprehensive reform (in earnest) would state that ALL profits earned are taxed. Stuff it in bags in the Caribbean for all I care... You're still paying the 21%! There is 1.3 trillion hidden oversees, one quarter trillion by Apple alone. Sitting and waiting for the next economic downturn and sob-story from a puppet that will tell us "that money isn't doing any good overseas".

Our politicians, all of them, run around acting like they're putting out dumpster fires while Rome is Burning and corporate greed warms it's hands on the fire.

I can't justify any company the size of FedX or Amazon not paying Federal Income Tax.... I don't know how that can even happen.

Then you can look at the Debt and Deficit and wonder how they got so big.

They amount those companies would have paid in taxes do not even amount to a drop compared to what the debt and deficit are. Not. A. Drop.

Millions and Billions when compared to TRILLIONS.

That's like saying the reason someone filed bankruptcy was because they dropped a penny earlier in the week.

I can if they actually didn't make a profit.. but their ability to take massive revenue, with huge operating profit, and turn it into 0 taxable profit is what bothers me. Because they deferred this and shifted that and prepaid some other thing and changed their accounting methods for inventory and did all of the hokus pokus behind the scenes, on paper, which largely has NOTHING to do with how they run their business or make money.. it's just a shell game to hide the money from the government.

And they pay off politicians to allow such a shell game stay in place. They can probably deduct that too.

Well, since the advent of Super PACs, and the fact that donors are allowed anonymity, you can bet your a$$ they are writing them off as donations to "social welfare" groups.

oh of course, I get that, but did you notice how both skyrocketed after the Trump tax cuts took over.

There is no way, NONE.. NO WAY IN HELL that FEDx should pay no tax.. Same with Amazon and thousand of other companies..

Will taxing them at the rate they were at prior to the cuts solve the problem,,, No,, not really,.,, But they've been given a free ride... time to take that away.

Fiscal cuts need to be taken also,,, Waste,, Like paying what we do for Politicians then allowing them to become shills for special interest groups so they fatten their wallets... Yeah, that's a great idea right..

No, it's time to clean up things... Trump only adds to the swamp,, He's not cleaning a damn thing.., Time to address the real problem,, The system is broken..

What do you know about taxes? Not much?

After my investment in new equipment I was doing great as far as taxes went. I didn't write everything off the first year, of course.

After the write off's expired, I paid a boatload more. It's the way it works.

By the way, my write offs came because I spent a lot of money buying a product made here, in the U.S., by a company that employed people, here. Those employees paid taxes, as did the company they worked for (unless that company was spending money expanding - meaning more people from other companies were employed).

Why do towns, cities, states etc. offer tax breaks? To get jobs for the citizens. The workers pay taxes day 1, the entity that gets a tax break saves some money up front, but pays it forward in the future.

I thought you were a business person?

[quote=archbolddawg]What do you know about taxes? Not much?

After my investment in new equipment I was doing great as far as taxes went. I didn't write everything off the first year, of course.

After the write off's expired, I paid a boatload more. It's the way it works.

By the way, my write offs came because I spent a lot of money buying a product made here, in the U.S., by a company that employed people, here. Those employees paid taxes, as did the company they worked for (unless that company was spending money expanding - meaning more people from other companies were employed).

Why do towns, cities, states etc. offer tax breaks? To get jobs for the citizens. The workers pay taxes day 1, the entity that gets a tax break saves some money up front, but pays it forward in the future.

I thought you were a business person?


Hey, I run a business also.. so I probably know as much as you, but the thing is, How does a company that has $65 Billion in sales, pay no federal income tax..

Because their expenses equaled or exceeded the $65 billion in sales...zero taxable income x 21% = Zero.

Let's see what they do and pay in the next few years.

key word was income. If I pay 600 for something and then sell it for 200, how much income did I generate?

I am sure they paid sales taxes employment taxes and a whole litany of other taxes. Your failing to see that they didn’t generate income. If I make 100 TRILLION in sales and my expenses are 999.9999999 TRILLION , how we gonna pay income taxes on that? Read your own post “65 billion in sales” that doesn’t mean they made 65 billion