The New York Times has been, relatively unsurprisingly, against President Trump’s tax cuts, going as far as to call them a “scheme.” So, imagine when the newspaper turned out to be a huge beneficiary of the new plan.
According to a statement from the company, its tax liability was almost halved in the first quarter of 2018 “primarily” because of Trump’s tax cuts, despite higher profits. And lo and behold, it doesn’t appear as if they’re giving the money back to the federal government.
“Operating profit rose to $34.1 million in the first quarter of 2018 from $27.8 million in the same period of 2017, principally driven by strong digital subscription revenues, which were partially offset by higher operating costs and lower print advertising revenues,” the paper said in a statement Thursday.
“Adjusted operating profit … increased to $55.5 million in the first quarter of 2018 compared with $50.2 million in the first quarter of 2017.”
Despite this rise in profits, The Times only “had income tax expense of $5.3 million in the first quarter of 2018 compared with $10.7 million in the first quarter of 2017.
“The decrease was primarily due to a reduction in the U.S. federal corporate income tax rate which took effect in 2018, and a tax benefit from stock-based compensation.”
So, what did The Times think about the tax cuts just a few months ago? In a February article titled “Well-Heeled Investors Reap the Republican Tax Cut Bonanza,” The Times’ editorial board posited that … well, actually, the title is pretty much self-explanatory.
“After President Trump signed the Republican tax cut into law, companies put out cheery announcements that they were giving workers bonuses because of their expected windfalls from the tax reductions,” The Times said.
“The president and Republican lawmakers quickly held up these news releases as vindication for their argument that cutting the top federal corporate tax rate to 21 percent, from 35 percent, would boost workers’ incomes even as it added $1.5 trillion to the debt that future generations would have to pay off.”
In spite of the fact that the economy is growing and unemployment is at record lows, both in no small part thanks to tax cuts, the folks at the Gray Lady were annoyed that stockholders actually got a high share of the benefit.
The Times admitted that “a small sliver of the money will find its way into paychecks of rank-and-file employees, but it won’t be a big boost and will probably come in the form of a temporary bonus, rather than a lasting raise.” According to Morgan Stanley, 43 percent would go to stock buybacks and dividends and 19 percent toward mergers and acquisitions, compared to 17 percent going for capital investment and 13 percent going toward bonuses and raises.
“Mr. Trump might argue that it doesn’t much matter that the tax cuts will be a boon for investors because many Americans own stocks,” they added.
“The president has recently touted the rising value of 401(k) accounts as a benefit of the tax law. But roughly half of all families own no stock, and most people have holdings that are worth less than $5,000. Most stock holdings, a whopping 84 percent, are in the hands of people whose incomes put them in the top 10 percent of households.”
Of course, that means that 50 percent do and would have more money to put into stocks (or to take the jump in the first place) thanks to tax cuts. Lower income families (i.e., those without stocks) would also see significant benefits from the tax plan — particularly those most vulnerable, who will find it much easier to find a job thanks to record low unemployment and a healthy economy.
Perhaps more importantly, at least 30 percent of the tax cut would be going back into the company directly, either in the form of capital investment or raises and bonuses. It’s worth noting that a healthy share price and mergers and acquisitions benefit a company, ultimately making it more viable (and a better place to work) in the long run.
If you don’t believe me, just ask The New York Times, which halved its corporate tax bill. What it does with the money is its own business, but apparently it’s getting in on the “Republicans tax cut bonanza,” and it’s more than happy to keep the savings. And, if the editorial board is really that worried about all of that “debt that future generations would have to pay off,” perhaps it can start urging Congress to enact spending cuts.
For whatever reason, I think that’s about as likely as The Times returning the money they saved on their taxes to the federal government.
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