FedEx CEO Frederick Smith fired back at the New York Times for a story alleging his company paid no taxes last year by essentially claiming the Times' parent company could be accused of the same offense.
The Times story, published Sunday, said the shipping company had "cut its tax bill to $0." The Times story also said FedEx spent the bulk of the tax savings on stock buybacks and dividends rather than investing in the company.
In an unusual move, FedEx's Smith claimed in a news release that the New York Times Co. paid no federal taxes in 2017, despite earning $111 million that year. "Pertinent to this outrageous distortion of the truth is the fact that unlike FedEx, the New York Times paid zero federal income tax in 2017," Smith said.
Smith also called the Times reporting "distorted and factually incorrect," but did not specify what the news report had gotten wrong. He even challenged New York Times Publisher A.G. Sulzberger and the paper's business section editor to a public debate on tax policy.
Danielle Rhoades-Ha, vice president of communications for the New York Times, expressed confidence in the accuracy of the paper's story. "FedEx's colorful response does not actually challenge a single fact in our story," she said in a statement. "FedEx's invitation is clearly a stunt and an effort to distract from the findings of our story."
Tax cut's corporate boost bigger than expected
The Times claimed FedEx's tax bill disappeared as part of a larger story on how U.S. companies have been able to save far more money than expected from the Republican-backed Tax Cuts and Jobs Act of 2017, which lowered the statutory federal corporate tax rate to 21% from 35%. The Times also said many companies have failed to use those tax savings on capital expenditures or other long-term investments that could spur future economic growth, as many CEOs and tax-cut fans had promised.
Those broader Times claims appear to be true: Earlier this year, Bloomberg estimated that corporations were on track to save as much as $2 trillion from the tax cuts over the course of a decade, or $600 billion more than was predicted at the time of the tax bill's passage in late 2017. And a National Association of Business Economics survey found that the tax cut had little or no impact on businesses' capital investment or hiring plans.
1. In both cases (of FedEx and the NYT), they all cut capital investments after the enactment of the 2017 tax reform. Contrary to the claims made by proponents of the 2017 tax reform that the reform will increase capital investments, it has not, and these two are examples.
2. It would be very, very nice if more corporations offer to have public debates with others about their taxes. Kudos to Mr. Smith for setting up that example. It may invite even more journalists/bloggers and academics to analyze and write even more about FedEx's taxes, and that would be a very good thing -- to get to all facets of the truth, to raise public awareness, to inform public policies in the future, etc. I wish more corporations would follow FedEx's lead to offer public debates on their taxes.
I'm not sure that it's necessarily the case that tax reform failed as far as increased capital investments are concerned. I think the trade war and the constant upheaval in other areas have made it difficult for corporations to plan long-term, so they're sitting back and waiting.
-------------------------------- When the world wearies and society ceases to satisfy, there is always the garden - Minnie Aumônier
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