The tax reform has significantly reduced the statutory corporate rate from 35% to 21%. It’ll be interesting to see what U.S. based companies do with the newly available cash. Depending on a company’s current tax position, they can now incur a 10% to 20% increase in their after-tax cash flows. This change is an exemplary avenue to invest in innovation and the growth of human capital.
The Road Being Taken
While many believe this is an ideal opportunity to nurture the efficiency and caliber of workers, not many companies are taking that route. Here’s what a few popular organizations have decided:
- Who: Home Depot, JetBlue and Pfizer
What: Plans to pass tax savings on to shareholders through stock buybacks.
- Who: Boeing, Southwest Airlines and Wells Fargo
What: Increased charitable donations.
- Who: Apple, AT&T, Comcast, Verizon and Walt Disney
What: Distributing one-time bonuses to their employees.
A Terrain Worth Exploring
Albeit giving bonuses and buybacks are productive uses of the new cash, there is a way to achieve more. Firms stand to gain more if they invest in the long-term prospects instead of being near-sighted. This can be done by directing their investments towards the following:
The advent of technology is fast making human capital less valuable. As per a report by McKinsey, roughly half of all jobs in the US are at risk of automation in the next 20 years. It’s vital to invest in enhancing employee skills to ensure that high-skill jobs are taken care of. However, this technological revolution is also our answer to the problem. The quantity & quality of learning available to us are at an all-time high today. There exist online platforms which offer several courses from more than 200 of the world’s best universities. For instance, AT&T sponsors a low-cost online master’s degree in computer science from Georgia Tech’s school of computing. The firm offers various courses to its employees so that they have relevant skills and don’t become obsolete.
We’re living in an age where the labor market is tight, and employee retention is a priority. Keeping this in mind, it is crucial that a firm invests in giving their frontline employees a stronghold. They must be updated and reliably productive. Dunkin’ Brands is working towards increasing efficiency and enhancing customer experience. They’re remodeling their stores and introducing new equipment to ensure success.
Let’s take a few lessons from Netflix. The firm transformed its identity from a mail-in DVD business to an extremely popular online streaming company. Innovation is an invaluable asset if one wants to survive in today’s hyper-competitive market. Companies need to rise to the occasion and let their imagination run free. It’s time to step up the game. After all, there’s a fine line between old being gold and old being obsolete.
If you’re a CEO, the Tax Cuts and Jobs Act has certainly given you a lot to think about. However, even if you’re a regular US tax filer, you have been affected by the tax reform too. At MyTaxFiler, we provide business & individual tax filing services, so tax filing doesn’t take a toll on you. Email us at email@example.com today.