FedEx Corporation (NYSE: FDX) shares were trading down Monday after the company and its CEO Frederick Smith were the subject of a new New York Times article highlighting how the Trump administration's 2017 corporate tax cuts have pushed FedEx’s taxes down to zero.
The policy change saved FedEx at least $1.6 billion in taxes, and the company is not investing that money as the administration had suggested companies would, the Times reported.
The delivery company shows the failure of the tax cuts to stimulate corporate investment in jobs and wages.
The U.S. companies that received the largest tax cuts have invested proportionately less of those savings than companies that received smaller tax cuts, according to Capital IQ.
Instead, FedEx and other companies are using those savings to reward shareholders.
FedEx’s tax burden dropped from $1.5 billion in 2017 to zero in 2018, yet the company had a lower capex in 2018 than 2017 and spent even less in 2019.
At the same time, FedEx doubled its dividend and share buyback commitment in 2018 to $1.6 billion and raised it again in 2019 to $2 billion.
The Times article is “distorted and factually incorrect,” Smith said in a statement in response to the article. The CEO lobbied for the tax cuts in 2017.
“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,” he said.
Smith didn’t dispute any specific details of the article in his statement, but challenged Times publisher A.G. Sulzberger to a public tax debate.
While FedEx was the focus of the article, it is far from the only company that has opted to devote its tax savings to shareholders rather than investment.
The tax cuts saved U.S. companies $1.5 trillion collectively, sending corporate profits up 16.2% in 2018.
Bloomberg found that several of the largest U.S. companies, including Apple, Inc. (NASDAQ: AAPL) and Walt Disney Co (NYSE: DIS), increased share buybacks by an average of 75.5%, dividends by an average of 9% and capital investment by an average of only 8.6%.
As a result of the ways companies have chosen to use their tax savings, U.S. GDP has grown an average of 2.86% in the first three quarters of 2019, while the SPDR S&P 500 ETF Trust (NYSE: SPY) is up 24.6% year-to-date.
While the tax cuts have certainly contributed positively to economic growth in the past two years, the data suggests a disproportionate amount of the benefits have gone to investors.
FedEx shares were down 1.43% at $156.13 at the time of publication Monday.