FedEx founder Fred Smith was one of the more visible corporate chieftans delivering media stump speeches in favor of President Trump's tax-cut plan, which still stands as his administration's greatest achievement two years later. And in what looks almost like an act of vengeance, the New York Times on Sunday took a paddle to FedEx, accusing the company of campaigning for tax cuts on the promise it would help bolster corporate investment, only to pull back on investment once it got what it wanted, even going so far as to offer buyouts and slow the pace of investment in other projects.
According to NYT's analysis of FedEx's filings, the company reaped big savings, bringing its effective tax rate down from 34% in fiscal year 2017 to less than zero in fiscal year 2018. Technically, the federal government owes FedEx money.
Two years after the law passed, the benefits to corporations like FedEx is becoming increasingly clear: Data compiled by Capital IQ show that there's no statistically meaningful relationship between the size of the tax cut that companies and industries received, and the size of subsequent investments - meaning that, for all the NYT knows, tax cuts actually encouraged companies to cut their investments.
So far, the tax cuts have saved FedEx $1.6 billion - a huge sum over just 2 years. That's compared with the $2 billion in taxes that the company has paid over the past 10 years.
A FedEx spokesman told NYT that it was unfair to judge the company by only one year's investments, and insisted that the boost to investment would manifest over years.
"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 G.D.P., create jobs and increase wages."
FedEx is hardly unique among American corporations, the NYT said. So far, corporations have saved $100 billion more on taxes than companies had anticipated. Meanwhile, FedEx and many other firms have bolstered their spending on stock buybacks by a huge sum. From Q1 of 2018, when the tax law fully took effect, companies have spent nearly 3x as much on dividends and stock buybacks.
Unfortunately for the NYT, FedEx isn't letting this go unanswered. In a statement released Monday, Fred Smith accused the NYT of publishing a "distorted" report...
The New York Times published a distorted and factually incorrect story on the front page of the Sunday, November 17 edition concerning FedEx and our billions of dollars of tax payments and billions of dollars of investments in the U.S. economy. 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 on earnings of $111 million, and only $30 million in 2018 – 18% of their pretax book income. Also in 2018 the New York Times cut their capital investments nearly in half to $57 million, which equates to a rounding error when compared to the $6 billion of capital that FedEx invested in the U.S. economy during that same year.
I hereby challenge A.G. Sulzberger, publisher of the New York Times and the business section editor to a public debate in Washington, DC with me and the FedEx corporate vice president of tax. The focus of the debate should be federal tax policy and the relative societal benefits of business investments and the enormous intended benefits to the United States economy, especially lower and middle class wage earners.
I look forward to promptly hearing from Mr. Sulzberger and scheduling this open event to bring further public awareness of the facts related to these important issues.
...and challenged the paper's publisher and its editors to a debate in Washington (Smith and his top people at FedEx vs Sulzberger and his top people at the Times).
We await a response from the paper.