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December 20, 2017

AT&T and Republicans - A Little Too Friendly? [Update: Boeing, Comcast and Wells Fargo Too]

Photo borrowed from People. Modified by us.
I really don't want to get into politics here, and I'm not trying to pick on a particular party (I would be posting this same thing if this happened with Democrats in charge), but AT&T just did a really big (and suspicious) favor for the Trump administration and I feel obligated to say something.

What did AT&T do?
They released a statement praising the just-passed tax reform bill and announcing they will be giving over 200,000 union employees a $1,000 bonus because of it. They also claim they will invest an additional $1 billion in the US next year due to the new rules.

I will take a moment to say this is great for the employees getting a bonus, and it's nice of AT&T to do this, but I'm very wary of their motives.

What's the big deal?
It seems pretty odd for AT&T to make a big (and very unusual) announcement that makes the unpopular tax cuts Congress just passed seem like a good thing for middle-class workers. It seems specifically designed to make the tax bill and Republicans in Washington look very good.

Why did they do this?
I can't say for certain, but there are a couple shady reasons AT&T might be a little too friendly with the current administration:
  1. Net Neutrality - AT&T could potentially profit handsomely from the repeal of net neutrality, which the FCC just passed. This announcement seems like a big "THANK YOU."
  2. AT&T-Time Warner Merger - Last month, the Justice Department sued to block AT&T and Time Warner from merging. It seems like this announcement could be AT&T trying to buy a little goodwill so its merger gets approved.
Questionable Timeline
Last I heard, the corporate tax cuts won't take effect until 2019, but AT&T is attributing bonuses in 2017 and additional investment in 2018 to the tax cuts. I'm not a corporate accountant, but that doesn't really make sense to me.

Fun Facts
AT&T's current tax rate:  33%
Corporate tax rate in new bill:  21%
AT&T's pre-tax profits for the last year:  $19.6 Billion
AT&T's tax savings for one year (21% vs 33%):  $2.3 Billion
Total of just-announced bonuses:  $0.2 Billion
AT&T CEO pay for 2016:  $28.4 Million

As I said, it was nice of AT&T to give a little something to their workers, but they (and presumably their shareholders) will still pocket billions of dollars a year from the tax cuts. Those bonuses don't seem so generous any more, do they?

Boeing made a similar announcement today, pandering to the current administration. This is not surprising given Boeing is a huge recipient of government funds for innumerable contracts, but it's especially suspicious given the recent gift Boeing received from the Commerce Department in the form of a ~300% tariff on a competitor's jet. They also got some grief from President Trump about the cost of a new Air Force One which this might be an attempt to smooth over.

Update 2
Comcast has joined the party with an announcement praising the tax cuts and the elimination of net neutrality. As another beneficiary of net neutrality, this announcement also feels like some backroom quid pro quo.

Wells Fargo also jumped aboard the praise train with an announcement. It seems like they might be doing this to avoid additional penalties for their recent scandals.

What do you think of these announcements? Am I being a conspiracy theorist? Let me know in the comments.

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