Walgreens to spend windfall from GOP tax cuts on itself

Melanie Schmitz

Melanie Schmitz Editor , Think Progress

Walgreens this week said it plans to buy back as much as $10 billion in shares and raised dividends 10 percent in the wake of the GOP tax cut passed in December.

The company is the latest to spend its tax windfall on shares, rather than workers, as many corporations pledged when the tax bill was being debated.

Walgreens on Thursday reported its effective tax rate was 7.6 percent, compared to 12.4 percent in the same quarter last year; profits also rose and sales were up 14 percent to $34.3 billion.

“I am pleased that, in what has been a challenging environment, we have again delivered solid earnings per share growth combined with healthy cash flow,” Executive Vice Chairman and CEO Stefano Pessina said in a statement. “We expect to continue to drive growth, bringing more patients to our U.S. pharmacies through the recent acquisition of Rite Aid stores and through strategic partnerships.”

In a separate statement, Executive Vice President and Global CFO James Kehoe added, “Our new $10 billion share repurchase program demonstrates our commitment to return cash to stockholders in the form of dividends and share repurchases over the long term.”

The company previously announced it would boost hourly worker wages by $100 million a year.

A number of companies have reported similar buyback programs in the months since the GOP tax bill was passed. The bill cut the corporate tax rate from 35 percent to 21 percent and repealed the corporate alternative minimum tax, which ensured companies paid at least some taxes. Corporations are also no longer required to pay taxes on overseas profits and will pay a meager 8 to 15 percent repatriation tax for any money they bring back into the country.

Initially, companies like Walmart, AT&T, Hostess, Wells Fargo, Comcast, and dozens of others pledged to use the tax cut for their employees, promising bonuses and, in some cases, small wage increases. The Trump administration repeatedly touted the bonuses in subsequent press briefings, bragging that they were proof the GOP tax bill — which it claimed would benefit middle class families and workers — was a success.

Since then, however, massive corporations have spent hundreds of billions of dollars on share buybacks. According to Howard Silverblatt, senior index analyst S&P Dow Jones Indices, corporations are likely to spend at least $1 trillion on buybacks and dividend increases by year’s end.

As Money Magazine notes, share buybacks are intended to “artificially increase” a company’s earning per share and “do little to improve the economy.”

Worker wages, by contrast, have declined since the tax bill’s passage, according to the Bureau of Labor Statistics. On June 12, the BLS issued its “real earnings summary” covering the time period between May 2017 through May 2018. The report showed that, for production and nonsupervisory employees, “real average hourly earnings decreased 0.1 percent, seasonally adjusted.”

The fact that corporations, not workers, have benefited most from the GOP tax bill is unsurprising. Days prior to its passage, Wells Fargo CEO Tim Sloan admitted that his company planned to use whatever windfall it raked in from the corporate cut to implement an aggressive share buyback strategy — one that certainly didn’t benefit employees.

“Is it our goal to increase return to our shareholders and do we have an excess amount of capital? The answer to both is, yes,” he told CNN Money. “So our expectation should be that we will continue to increase our dividend and our share buybacks next year and the year after that and the year after that.”

The Congressional Budget Office recently predicted in its annual long-term outlook report that the GOP tax bill will cause federal debt to skyrocket over the next 30 years, “approach[ing] 100 percent of GDP by the end of the next decade and 152 percent by 2048,” and could push the nation to the brink of yet another grim financial crisis.


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