All Financial Wisdom
Early Consequences of Tax Reform: Apple’s Repatriation and Salary Increases
The tax reform recently approved by the United States Congress has been promoted by Trump as a way to stimulate investment and job creation, despite the criticism that it mainly benefits large companies and the rich.
The cut in corporate taxes gives companies extra money, which they can use to increase wages, pay shareholders greater dividends, invest in capital goods or reduce prices for their customers.
Although one of the problems of the tax reform is that it will contribute around 1.5 trillion dollars in the next ten years, for now, we’re will focus on the announcements of the companies after this reform: the historical repatriation of Apple and the rise in wages of workers.
Apple and its historical repatriation
Apple is the largest US taxpayer and also one of the largest beneficiaries of the tax reform that reduces the rate of repatriated benefits to 15% and reduces the corporate tax rate to 21% from 35%.
Apple had accumulated more than 250 billion dollars outside the United States, claiming that shareholders were not interested in repatriating the money with a tax rate of 35%.
This repatriation will mean paying about 38,000 million dollars in taxes, the largest payment on benefits repatriated from abroad.
Apple has said that it expects to spend more than 30 billion dollars in direct investments in the United States over the next five years, creating approximately 20,000 new jobs, and said that the repatriation would contribute 350 billion dollars in US economic activity.
Another expected decision is that Apple would share part of the wealth with employees around the world through bonds of $2,500 in restricted shares.
Trump has had a bitter relationship with Apple, even calling for the boycott of its products. However, he has not hesitated in his Twitter account to congratulate Apple’s decision:
Walmart announces salary increase
Walmart, the largest company in the world by its volume of staff, employs 2.3 million people worldwide, with 5 million of those workers in the United States.
The company has announced that it will raise the minimum wage of its employees in the United States to $11 dollars per hour, compared to the current 10 dollars.
In total, it has been forecast that this measure would mean an increase of 300 million dollars of annual expenses.
Walmart would offer between 200 and 1,000 dollars in a bonus for those employees who will not receive a salary increase. The application of this bonus is based on seniority in the service, for workers with at least 20 years in the company.(Yes, this is ridiculous, I know).
One of the main retail competitors for Walmart is Target, and it had raised its hourly minimum wage to $11 in October, and said it would raise wages to $15 by the end of 2020. With this scenario, Walmart could not be left behind.
Low unemployment and lower taxes boost wages
Not only must Walmart be highlighted in its salary increase, but many other large companies have announced bonuses to workers after the approval of the Republican tax plan, such as AT & T and Comcast.
Large companies are also being pressured to increase wages because unemployment rates are at a low, which allows job seekers to be more selective. It is the logic of the market, when the labor factor is scarce, prices (wages) tend to increase.
The unemployment rate in the United States has remained at 4.1% during the last three months, the lowest level since 2000. The average hourly wage increased by 2.5% in December compared to the previous year.