Tax Reform Catastrophe: Major Restaurant Company Announces $20 Million Investment in Workforce, Visa to Boost Benefits



Guy Benson, January 11, 2018



Shall this darkness and despair never relent?  You already know that more than one millionUS workers have received tax reform-spurred bonuses, with at least 100 companies getting in on the act thus far, as even more corporations announcing new investment plans seemingly every day.  We've covered the immediate fallout of the Republican tax law very closely, tracking the crimes against humanity wrought by this destructive Frankenstein monster, also known as the worst piece of legislation ever considered by Congress -- ranging from increased compensation, to enhanced hourly wages, to new hiring, to upgraded investments, to massive charitable contributions.  Here is the latest atrocity, via the Darden restaurant group, which owns large national chains like Olive Garden and LongHorn Steakhouse Restaurant companies are joining the corporate chorus rushing to praise the tax bill Congress passed last month as Orlando-based Darden Restaurants said the legislation will save it about $70 million. Olive Garden and LongHorn Steakhouse parent company Darden Restaurants said the new tax reform plan will cut taxes by about $70 million in the third quarter. The Orlando-based restaurant chain said Monday the tax cut will prompt it to spend an additional $20 million on its 175,000-plus employees this year, but did not give specifics. Darden (NYSE: DRI) said its effective tax rate will drop from 25 percent to 18 percent going forward. "One of the best investments we can make is in our people,"said a statement from CEO Gene Lee. "During the remainder of fiscal 2018, we will invest approximately $20 million in initiatives directly benefiting our workforce. This investment will strengthen one of our most important competitive advantages – a results-oriented culture – as we continue to improve on the guest experience, and position Darden and our brands for long-term success."...With the tax boost, Darden raised its fiscal outlook for the year by about 25 cents a share to $4.70 to $4.78.

This is precisely what many liberal doomsayers confidently predicted would not happen, quoting some CEOs, while ignoring others.  Other players in the industry are also thrilled with the new results, with one executive saying the new tax climate will allow his company to bring more money back into the United States.  The river of tears keeps flowing:is just the latest in a host of companies, including Boeing, AT&T, Fifth Third Bancorp and Wells Fargo, to share proceeds from the GOP corporate tax cut with employees. In all, there was $5.3 trillion in 401(k) plans as of Sept. 30, 2017, according to the Investment Company Institute. The median balance in a 401(k) account was $24,713, according to Vanguard. Unlike bonuses, which employees could either save up or blow on shopping, an increase to a retirement plan match is useful for workers' long-term financial planning, said Gregg Levinson, senior retirement consultant at Willis Towers Watson.

That's a meaningful lasting investment that will help fortify employees' retirement plans, with additional "sustainable" benefits in the works.  Finally, we've heard a lot of griping from the Left about how the tax law's new individual and family tax rates (which are going down for 80 percent of all Americans) have a sunset date, whereas the corporate cuts are permanent.  As I've written, Republicans should pressure Democrats to extend the middle class tax cuts (91 percent of middle income households will get a tax reduction) indefinitely, but there is a strong economic argument for making the US corporate rate both significantly lower and stable, which this law achieves.  Prior to reform, American companies faced the highest statutory tax rate in the developed world, and one of the highest effective rates, as well.  The GOP-supported law brings the US more in line with the OECD average, vastly improving competitiveness and efficiency.

Ruth’s Hospitality Group chief operating officer Arne Haak said the tax changes will also benefit the Winter Park-based parent of Ruth’s Chris Steak Houses. “The tax reform is very good for us,” Haak said at the ICR Conference Monday, a gathering of restaurant and retail industry companies in Orlando. The tax reform bill will allow Brazilian steakhouse chain Fogo de Chao to lower its tax rate and bring money back from overseas, said chief financial officer Tony Laday. “We are an international company — we do have operations in Brazil — and we were prohibited from a tax perspective from bringing some of that cash back home,” Laday said at the ICR Conference. “There’s a net benefit from the tax perspective and greater flexibility from a tax perspective."

Meanwhile, here's the latest indignity from credit card behemoth Visa is just the latest in a host of companies, including Boeing, AT&T, Fifth Third Bancorp and Wells Fargo, to share proceeds from the GOP corporate tax cut with employees. In all, there was $5.3 trillion in 401(k) plans as of Sept. 30, 2017, according to the Investment Company Institute. The median balance in a 401(k) account was $24,713, according to Vanguard. Unlike bonuses, which employees could either save up or blow on shopping, an increase to a retirement plan match is useful for workers' long-term financial planning, said Gregg Levinson, senior retirement consultant at Willis Towers Watson.

That's a meaningful lasting investment that will help fortify employees' retirement plans, with additional "sustainable" benefits in the works.  Finally, we've heard a lot of griping from the Left about how the tax law's new individual and family tax rates (which are going down for 80 percent of all Americans) have a sunset date, whereas the corporate cuts are permanent.  As I've written, Republicans should pressure Democrats to extend the middle class tax cuts (91 percent of middle income households will get a tax reduction) indefinitely, but there is a strong economic argument for making the US corporate rate both significantly lower and stable, which this law achieves.  Prior to reform, American companies faced the highest statutory tax rate in the developed world, and one of the highest effective rates, as well.  The GOP-supported law brings the US more in line with the OECD average, vastly improving competitiveness and efficiency.

I'll leave you with Trump doing what he ought to be doing every day -- highlighting the strong economy, touting tax reform (about which the Left has lied incessantly), and hitting Democrats for their knee-jerk and lockstep opposition to a law that benefits the vast majority of the American people. 


 

Trump Can Take Credit for Black Unemployment Drop

Star Parker, January 11, 2018

There's plenty to celebrate in the December Bureau of Labor Statistics report showing black unemployment at 6.8 percent, the lowest ever since they started reporting the data in 1972.

President Trump tweeted out his excitement and, of course, took credit for the good news. Has there ever been a politician who didn't take credit for good news on his watch (or rationalize away responsibility for bad news)?

The president's detractors, of course, wasted no time in challenging him, pointing out that unemployment rates have been dropping since the economic recovery started, well before Trump took office. Trump, they say, is as responsible for this latest monthly drop as he is for the morning sunrise.

It seems to me quite reasonable for Trump to take credit for this. There are, indeed, positive things happening as result of his leadership -- deregulation, a new tax bill, overall business-friendly policies and rhetoric. These things create a business environment of optimism and confidence, which drives investment and increases demand for labor.

However, rather than obsessing about what particular politician to praise or excoriate for certain economic results, our discussion should be about policies and not about personalities. Let's savor this news but not lose our sobriety regarding the great task before us in this community.

The latest 6.8 percent black unemployment figure sounds great for blacks. But not for whites. The white rate for December was 3.7 percent. Why should there be celebrations that the black rate is "only" 3.1 percentage points higher than the white rate? Why should there be a different economic standard for blacks?

Black unemployment rates have averaged twice the white rate since 1972.

Black poverty rates are around twice the national average.

Black income and household wealth have hardly changed, remaining a fraction of that of whites.

This is the conversation we should be having. When do all American citizens participate equally in our national economic cornucopia?

Donald Trump was onto something when he asked blacks, during the presidential campaign, "What do you have to lose?"

Trump is offering a mindset that blacks should relish. A completely new and different reality. The cultural and political reality that blacks have turned to for years -- big government -- is the reason these gaps persist. It's time for something new.

Black unemployment peaked at 16.8 percent in March 2010 during President Obama's efforts to recover from the 2007-2008 economic collapse.

But the irony is that the collapse was driven by government policies put in place to help low-income Americans to make housing purchases. Contrary to what Barack Obama pitched to the country -- blaming business and claiming the problem was insufficient government and regulation -- American Enterprise Institute scholar Peter Wallison has shown the opposite.

Government policies mandating higher quotas of mortgages for low- to moderate-income borrowers put an increasing percentage of subprime mortgages on the market. By 2008, according to Wallison, 56 percent of the mortgages acquired by Fannie Mae and Freddie Mac -- the two massive government-backed mortgage companies -- were in this category.

Then everything collapsed.

An ocean of new regulations on financial services, enacted as part of the Dodd-Frank Act, was the Democratic Congress' answer to their own misdiagnosed analysis of what caused the collapse. As a result, we had a slower-than-normal economic recovery.

These are the discussions we need today. How do we get out of the big government mindset that has been a drag on our economy and has perpetuated economic underperformance in low-income communities?

In this context, Trump is right to boast. He is bringing badly needed new thinking on issues concerning low-income America. It's already making a difference.

 


 

Instead of 'Infrastructure Investment,' How About Killing Davis-Bacon?



Larry Elder, January 4, 2018

Is there a difference between President Barack Obama's "stimulus" and President Donald Trump's "infrastructure investment"? Despite costing $800 billion, most economists do not believe Obama's "stimulus" program did much stimulating. During the Great Depression, President Franklin Roosevelt's secretary of Treasury wrote in his diary that the New Deal spending, designed to rescue the economy, was not working. Treasury Secretary Henry Morgenthau wrote: "We have tried spending money. We are spending more than we have ever spent before and it does not work. ... I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. ... I say after eight years of this Administration we have just as much unemployment as when we started and an enormous debt to boot!"

Trump, in announcing his upcoming plans for 2018, said: "Infrastructure is, by far, the easiest. People want it, Republicans and Democrats. We're going to have tremendous Democrat support on infrastructure, as you know. I could've started with infrastructure. I actually wanted to save the easy one for the one down the road. We'll be having that done pretty quickly."

What if, instead of spending more on infrastructure, the government began paying nearly 20 percent less for projects? And how about pushing privatization, where possible, over the inevitably more costly government spending?

The Davis-Bacon Act, a Depression-era measure, was designed to thwart black workers from competing against white workers. It requires federal contractors to pay "prevailing union wages." This act sought to shut out black workers from competing for construction jobs after white workers protested that Southern blacks were hired to build a Veterans Bureau hospital in Long Island, New York -- the district of Rep. Robert Bacon, one of the bill's sponsors. It is remarkable the Davis-Bacon still lives despite its racist intent and its discriminatory effect -- to this day -- on black workers. Passed in 1931, two Republicans teamed up to sponsor it.

In a labor market dominated by exclusionary unions that demanded above-market wages, blacks, at the time, competed by working for less money than the unionists. Davis-Bacon stopped this by requiring federal contractors to pay prevailing local union wages, causing massive black unemployment. Lawmakers made no secret of the law's goal.

In the House of Representatives, Congressman William Upshaw, D-Ga., said: "You will not think that a Southern man is more than human if he smiles over the fact of your reaction to that real problem you are confronted with in any community with a superabundance or large aggregation of Negro labor." Rep. Miles Clayton Allgood, D-Ala., supported the bill and complained of "cheap colored labor" that "is in competition with white labor throughout the country." Rep. John J. Cochran, D-Mo., stated that he had "received numerous complaints in recent months about Southern contractors employing low-paid colored mechanics getting work and bringing the employees from the South."

Davis-Bacon adds as much as 20 percent more to the cost of any federal project. And most states have enacted local Davis-Bacon laws that similarly jack up the price of those government construction projects.

This brings us to privatization. Why not encourage more projects to be built and run by the private market?

In California, for example, the Democratic governor pushes a "bullet train" that promises to benefit Los Angeles-to-San Francisco travelers. Yet the governor expects taxpayers to pay for at least part of this supposedly wonderful project. If it is predicted to be so profitable, why should taxpayers finance it?

Finally, it is not true that our gas tax has not kept pace with federal highway route expenses. From 1982 through 2014, federal gas tax revenues increased nearly 6 percent a year, according to the Cato Institute's Chris Edwards. He also points out that, beyond transportation and water, "most of America's infrastructure is provided by the private sector, not governments." "In fact," says Edwards, "private infrastructure spending -- on factories, freight rail, cell towers, pipelines, refineries, and other items -- is four times larger than federal, state, and local government infrastructure spending combined."

Businessman Trump is uniquely positioned to make the case not for more government spending but for less -- but more efficient -- spending. Obama's failed "stimulus" should serve as Exhibit A for what we ought not do. Trump should make the case to abolish Davis-Bacon, and for the privatization of as much infrastructure as possible.

So what's the difference between Obama's "stimulus" and Trump's "infrastructure investment"? Obama spent $830 billion in four years, while Trump says he wants to spend as much as $1 trillion in 10 years. Unless we kill Davis-Bacon and move toward more privatization, the answer may be no difference at all.



Editors Corner

My wife and I rode around Locust this week just to see what was happening in our town for early January, for starters I counted over a dozen new houses being built in different stages, several lots being cleared for more homes. A new resturant opened in the West Main Plaza, Three new businesses being built, a new business park under construction with one lot being graded for a building. In other words a lot going on for the first two weeks in 2018. I can't wait until Spring to see what is happening in Locust.