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Related Categories: U.S. | Labor & Workers
A fair and solid crisis financing
by Philipp Gerhartinger and Joseph Woss
Wednesday Aug 5th, 2020 12:07 AM
The contrast between the EU and the US in COVID financing could hardly be greater. McDonald's operators, Marathon Oil (over $400 million), Exxon, Chevron and Sea World received relief and will reduce their future tax payments. Tax gifts charac terize the US way of corruption and contradict these recommendations.
A fair & solid crisis financing

by Philipp Gerhartinger

[This article published on 5/15/2020 is translated from the German on the Internet, https://awblog.at/gerechte-solide-krisenfinanzierung/.]


The high costs of coping with the Corona crisis and the necessary investments in the welfare state, labor and the environment represent a challenge for the national budget in the medium term. It is clear to everyone that this can only be mastered together. But how exactly can the extraordinary financing requirements be guaranteed and at the same time a fair distribution be ensured, which will prevent the financing of the welfare state from ending up in even greater imbalance? There are five cornerstones to consider here.

Recommendations on crisis financing

Before doing so, however, it is worth taking a look at the basic range of actions that the government can take in budgetary terms. The various measures of the COVID-19 laws and the effect of the automatic stabilizers, coupled with revenue shortfalls due to lower tax revenues, will drastically increase the budget deficit. In a scenario that is probably too optimistic, WIFO expects a budget deficit of EUR 28 billion (7.4 per cent of GDP) in 2020. In simplified terms, the budget balance is always calculated as income minus expenditure. This means that both sides can be tightened. If the goal is set of achieving a lower balance, either expenditure can be reduced or revenues increased. However, a third possibility often remains unconsidered. The government can accept a higher balance and borrow or issue government bonds to finance it.

All three options have economic advantages and disadvantages that must be weighed up. Prosperity-based budget policy should always be the focus of attention, and lessons from the past, especially from the last financial and economic crisis, must be taken into account. In the following, the cornerstones are discussed which would provide a solid financial basis for Austria as a whole at the moment, place an essential focus on distributive justice and thus enable a swift and economically sound way out of the crisis.

1) No return to austerity policy and zero deficit

The crisis has shown the superiority of public health and the welfare state in general. Their financing must be put on a solid footing, but this will require a temporarily higher deficit. The government's financing strategy must not, at the first opportunity, revert to cutback programs at the expense of the general public. The government's watchword at the beginning of the crisis was "whatever the cost". This must not only apply to saving the economy, but must continue to apply until the labor market and the welfare state are back on a firm footing and clear progress has been made in climate policy. It is dangerous, both for people and for the economy as a whole, to define a "zero deficit" as the goal of budget policy as early as 2021. A tight zero-deficit austerity corset is cutting us off, but we must be able to breathe if we are to emerge from this crisis.

The most important goal of budget policy must therefore remain to eliminate the consequences of the crisis, for example in the health system or on the labor market, and to secure and increase the prosperity of the population. In the medium term, the state budget will benefit significantly from the fact that interest costs are zero. This immense advantage must also be secured for all other EU countries, otherwise a new euro and national debt crisis threatens, from which Austria would also suffer. Despite the declining interest expenditure in the national budget, however, the budgetary costs of the COVID 19 pandemic will be considerable and have a long lasting effect. Further measures are therefore needed.

2) No scope for capital-side tax gifts

International organizations such as the EU Commission, the OECD or the International Monetary Fund have been suggesting for many years that Austria should restructure its tax system in order to promote employment and growth. This is by no means a matter of reducing taxes in general and undifferentiated across all areas. An undifferentiated reduction of taxes must in any case be rejected. Rather, the recommendations envisage a restructuring in which taxes on labor are reduced and higher contributions from assets are demanded in return. Only in this way can a solid financial basis be guaranteed.

Tax gifts for the capital side, as announced in the government's original tax reform plans, clearly contradict these recommendations. They were already unsuitable in economically "normal" times and would have led to a further aggravation of the imbalance in the Austrian tax system. This is all the more true in times of economic crisis, as they would massively limit the possibilities for active economic policy. These tax gifts must be cancelled!

The main issue is the planned reduction of the profit tax rate - a tax gift worth billions for large corporations, which does not create any significant investment incentives and 80 percent of which goes to the most profitable five percent of companies. Beyond that, however, the envisaged KESt exemptions also appear to be generous gifts for investors, which bring nothing but cost a lot. In addition, there are numerous other gifts for companies, but also unjustified benefits for agriculture (e.g. tax-saving smoothing of profits or the budget-intensive compensation of sinking EU agricultural budgets). These would currently place an unnecessary additional burden on the budgetary situation and should therefore also be cancelled.

In contrast to the planned reduction of the KöSt, the planned wage and income tax reform cannot be regarded as a tax gift, as it is merely a refund, a compensation for the cold progression of the past years.

3) Sustainably offsetting imbalances in the tax system

However, the elimination of tax candy, which would make the tax system even more unfair, is not enough to move closer to the international recommendations for tax structure reform and correct the imbalance. This requires additional contributions from the really rich. Previous demands for taxes on millionaires, fair contributions from large international corporations and inheritance and gift taxes must continue to be upheld, as these are necessary in the long term to relieve the burden on labor income and to finance public services.

4) Let millionaires & billionaires participate in the financing

However, extraordinary challenges require not only compensatory measures but also extraordinary contributions. These must come from those who can afford it. This is the only way to ensure that there are no negative effects on demand. Asset-based taxes in particular are a growth-neutral option here.

A temporary wealth tax on outstanding wealth in the millions and billions of euros, amounting to 2 per cent per year for assets over EUR 10 million, 3 per cent for assets over EUR 100 million and 4 per cent for assets over EUR 1 billion, would affect only 1 per cent of all households and would add around EUR 7 billion per year in additional revenue to the budget. This would help to cover the special financing needs.

Furthermore, a temporary increase in capital gains tax on dividends from 27.5 to 35 percent would also bring an additional financing contribution of around 600 million euros per year. A temporary increase in the top tax rate to 75 percent for top incomes above one million euros could contribute another 80 million euros or so and would only affect around 300 top earners. This would not only protect growth and employment, but would above all be fair.

On the other hand, additional financial contributions should under no circumstances be directed at the broad masses and employees. This would have negative demand effects, which are currently problematic, lead to social distortions and further aggravate the imbalance in the tax system.

5) No financial hardship through greening the tax system

It must be emphasized that even steps towards greening the tax system must not be used to finance the crisis. Here, the focus should always be on an ecological steering effect, and genuine socially balanced reimbursement measures should be provided as part of an overall reform. This is the only way to counter the regressive effects of eco-taxes and thus correct their negative distributional effects, especially for employees.

Conclusion

Employees have already had to take on a lot during the crisis. They must not now also shoulder the financing of the costs incurred predominantly on their own. This would happen, however, if (a) the welfare state were to be broken down, (b) the financing were to come exclusively from the general tax pot, which is currently covered by 80 per cent of their contributions, or (c) they were made to pay even higher tax contributions.

An employee-oriented response must therefore include additional contributions of millions of dollars in assets to prevent a wave of cuts from rolling over the working people in this country.



Welfare state - anchor of stability in the crisis

by Joseph Wöss

[This article published on 4/27/2020 is translated from the German on the Internet,

Solidarity and fair burden sharing are basic principles of the welfare state. These principles must also be at the forefront when it comes to financing the costs of the crisis and making a fresh start after the crisis. The welfare state must be protected and further developed and the course must be set towards eco-social restructuring and, in general, towards greater justice. The work of the government will have to be assessed centrally on these points.

Welfare state and crisis

The crisis is hitting many people very hard. Even more than usual, such a situation shows how important a well-developed and solid welfare state is. Our welfare system is proving to be efficient and must remain so in the future. Necessary emergency programs - such as the relief funds set up by the government - can build on this. And where weaknesses become apparent, they must be addressed as quickly as possible. These range from obstacles in accessing the relief funds, to problems with care and protective equipment in hospitals, to inadequate income replacement in the event of job loss, and to gaps in the "safety net" of social assistance.

At present, the health sector and the labor market service in particular are facing massive challenges in the social system. Great work is being done in both areas, as well as everywhere else where, despite the risk of corona, full work is needed to keep the country running - in many cases at considerable health risk.

The crisis makes us aware of what many often overlook or refuse to acknowledge for political reasons: The real performers in our society are often professionals at the lower end of the income scale. One of the lessons of the crisis must be that in future their work must be remunerated according to its value and thus much better than before.

Health system - expanding rather than weakening

The health system is a good example of how justified warnings of cuts in social budgets are. Slogans such as "saving in the system" are still well remembered, as is the reference to a supposedly huge savings potential. De facto, this is primarily aimed at reducing the number of staff in hospitals and the number of acute-care beds. Today we can consider ourselves fortunate that this "leveraging of efficiency potential" has largely been prevented.

There must be no doubt that covering the additional costs and loss of revenue in the health system must be part of the aid programs. It is also important that measures to increase crisis resilience are taken quickly, including in the supply of medicines. Other problems must also be resolved, such as the loss of the possibility of benefiting from preferential self-insurance in the event of the loss of marginal employment.

Labor market - preserving jobs is the order of the day

The second huge challenge, apart from health protection, is the labor market. Despite paralyzing large parts of the economy, job losses must be kept to a minimum. The generous short-time work promotion scheme developed by the social partners, with 80 to 90 percent wage replacement, is the best instrument for this. The current figures, with some 900,000 workers affected and the enormous increase in unemployment, show how serious the economic slump is and how important the possibility of short-time work is.

A central goal of crisis management policy must be to maintain the jobs of short-time workers beyond the retention period and to bring the number of unemployed back to pre-crisis levels as quickly as possible.

Financial security - Corona must not become a poverty trap

Those who have lost their jobs and thus their income overnight as a result of Corona, or who were already unemployed before the crisis and currently have no chance of finding a new job, have been hit particularly hard by the crisis.

In addition to many one-person companies, cultural workers, etc., the loss of work has so far mainly affected workers who often earned very little even before the crisis. The latter receive unemployment benefits, but at 55 percent the income replacement rate is decidedly too low and should be urgently increased.

It is also very important to facilitate access to the "safety net" of social assistance and to improve the level of benefits, not least for children.

The same applies to the demands to the Federal Government to remove undue restrictions on access to the relief funds. If such proposals are disregarded, there is a threat of a huge increase in the number of people at risk of poverty in Austria too. Everyone who is currently blocking this should be aware of this.

Statutory pensions - a reliable pillar even in the crisis

Pensions are currently attracting little attention, not least because the statutory pension insurance system functions smoothly even in times of crisis. Here it is a great advantage that 90 percent of the benefits in Austria come from the statutory system and are therefore not tied to the dramatic fall in stock market prices. However, the decline in premium income and the increasing number of elderly people will require a higher use of federal funds in this area as well. This is basically guaranteed by the legally regulated instrument of the "deficiency liability" of the Federal Government. In any case, the aim must be to safeguard the purchasing power of pensions and to maintain the system's performance for today's younger people.

An important contribution to supporting the people concerned and at the same time to relieving the labor market would be to make access to disability or heavy labor pensions less restrictive for people with impaired health or people who have been working very hard for many years, at least for the period of very high unemployment.

Positive location factor and "automatic stabilizer

Often underestimated but very significant advantages of strong social systems are also the positive effects on the economy (qualified workforce, compatibility of work and family life, health protection, purchasing power, social peace, etc.), including their - currently particularly important - function as an "automatic stabiliser" in times of crisis. Stable pensions, unemployment benefits, short-time work support, etc. considerably curb the slump in demand that accompanies an economic crisis.

A massive collapse in private consumption would exacerbate the current economic crisis even further and cause many more companies and employees to face existential problems. The necessary economic recovery will also depend to a large extent on how private purchasing power develops in the coming months and years.

The protection of social security systems is also of crucial importance from this point of view.

Rising costs, lower revenues

It is clear that the corona crisis is leading to massive challenges for the welfare state as well, especially due to the enormous additional costs for short-time work, unemployment benefits and in the health care system. In addition, there is the considerable decline in contribution income due to declining employment. In order to prevent this from causing lasting damage, a high degree of flexibility is needed in public budgets.

The government is right with its casually formulated approach that no costs must be spared ("at any cost") when it comes to managing a crisis of this dimension. Since crisis management will certainly not be achieved overnight, the necessary expansionary budgetary policy must be designed from the outset over several years. The mistakes made in overcoming the economic crisis of 2008/2009 must not be repeated, when the entire euro zone - with enormous social and economic consequential costs - switched to a rigid austerity course within a short period of time.

A financial protective shield via the social systems must be one of the central elements of the crisis management program.

Who pays the costs?

It is evident that the crisis will place a massive burden on public budgets. A fair distribution of the burden is indispensable. The main burden must be borne by those who are able to do so without cutting back on their living standards.

Above all, what is needed are progressive levies on large assets, large inheritances and peak incomes, and a ban on dividend payments in companies that demand support from public funds. It is also necessary to put a stop to the opportunities for tax evasion by the rich and large corporations. Substantial changes are also needed in the EU's tax policy. For example, we must put a stop to tax dumping. The Financial Transaction Tax should also be taken up again and finally implemented.

On the other hand, it would lead to a social disaster if a large part of the burden of crisis financing were to be placed on lower income groups, average earners and social protection systems. Ultimately, the government's work on the Corona crisis will also be measured very centrally in terms of the distribution of costs.

New start - in the right direction

There will be no going back to the state before Corona, after such a crisis it is impossible. The necessary restart will in all probability be much more difficult than many people imagine today. But crises also offer opportunities:

The huge economic stimulus package required must be directed to where there is an urgent need for investment anyway, while at the same time creating valuable jobs: Care, childcare, educational institutions, social housing, climate protection, infrastructure, digitization etc., all of which are in need of investment. The period of high unemployment lends itself to a clear focus on training and further education: the best possible initial training for young people, catching up on educational qualifications, qualified retraining in occupations where there is a shortage, etc.

Work, income and wealth must be distributed more fairly, and a number of "rules of the game" in our society must be changed. The upheaval forced by the crisis will hopefully force even hard-boiled defenders of the existing to rethink - if only because otherwise dramatic distribution conflicts threaten. The divergence between rich and poor must be stopped and steered in the opposite direction. Serious changes are also needed in the distribution of paid and unpaid work.

The process of European integration also needs a reorientation towards a social and welfare community based on solidarity. And last but not least, the current global crisis should be the occasion for a radical correction of the logic of globalization, which is primarily oriented towards capital interests - oriented towards ecological sustainability and social progress and thus towards the interests of the broad majority of people, both here and in all other parts of the world.

Thriving companies getting hundreds of millions in federal coronavirus tax breaks | Exclusive
By Jason Garcia
Orlando Sentinel |
May 21, 2020 https://www.orlandosentinel.com/coronavirus/jobs-economy/os-ne-coronavirus-corporate-tax-breaks-savings-20200521-4br52rs5lve3vmdcfjrhwbvfhe-story.html
Corporations across America have booked more than $7 billion in savings using tax breaks that Congress passed as part of its plan to stabilize the U.S. economy through the coronavirus crisis, according to an Orlando Sentinel review of investor filings.
The corporate tax breaks have steered hundreds of millions of dollars to companies that are thriving during the COVID-19 pandemic — including a drug manufacturer that said the virus boosted its quarterly sales by $75 million and a company making N95 masks for the federal government. Even the tech platform Grubhub Inc., where orders rose while millions of Americans sheltered in place, scored at least $6.8 million in savings.
The tax breaks have also rewarded some companies for mistakes they made long before the novel coronavirus emerged. They have helped other companies send more money to their investors through richer dividends and faster stock buybacks. And in at least one case, the tax savings are passing from a smaller business to a bigger one: The struggling women’s clothing retailer Francesca’s Holdings Corp. has filed for a $10.7 million tax refund but will immediately give the money to banking giant J.P. Morgan Chase & Co., according to the terms of a loan agreement between the two companies.
Trinity Industries Inc., which makes freight and tank cars for railroads, expects to get $303 million in refunds. Wearable-tech company Fitbit Inc. reported a $145 million tax benefit. Amneal Pharmaceuticals Inc., which makes the anti-malarial drug hydroxychloroquine that has been championed by President Donald Trump, expects a $110 million refund in the second half of the year.
To be sure, the tax breaks have provided an important cushion for scores of businesses that have been hit hard by the COVID-19 pandemic and the historic economic downturn it has caused — from airlines and hospital systems to restaurant, hotel and amusement park chains. Oil and gas companies, which have also been crushed by collapsing oil prices, have reported some of the biggest tax savings of all.
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But if the goal was to throw another coronavirus lifeline to corporations, Congress “probably could have done a little better job in terms of targeting,” said David Hasen, a University of Florida professor of tax law.
“The government could have just as easily handed out cash,” Hasen added. “It might have been more effective to do it that way from an economic perspective. But there’s long been an aversion to the idea that governments give handouts. This is economically identical, but the optics are better for the government.”
Coronavirus Jobs and Economy
Congress’ coronavirus economic plan includes huge business tax breaks — some on profits dating to 2013
Apr 03, 2020 at 9:42 AM
The business tax breaks attracted little attention during the rushed debate in March over the federal government’s sweeping “CARES Act,” the $2 trillion economic rescue bill that included everything from bigger unemployment benefits to business grants and loans. But the breaks are now the subject of a new battle on Capitol Hill. Democrats, who control the U.S. House of Representatives, want to scale back the breaks. Republican leaders — including President Trump — and business lobbyists want to expand them instead.
Defenders say the tax breaks are infusing corporations with money that they can spend to keep people employed during the sharpest economic downturn since the Great Depression.
“The tax benefit does gives us a little more leeway … so that we can maintain our staff levels a bit more at the same time that we work through this pandemic,” James Cracchiolo, the chairman and chief executive officer of wealth-management firm Ameriprise Financial Inc., told analysts during the company’s quarterly earnings earlier this month.
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Ameriprise, which records show was one of many companies that lobbied Congress on the CARES Act, said it expects to get a tax benefit of as much as $220 million thanks to the legislation. The company also increased its quarterly shareholder dividend by 7 percent — to about $140 million in total.
All of the other big CARES Act programs to help businesses come with conditions — such as grants that must be spent paying workers or loans that impose limits on stock buybacks, dividend payments and executive compensation.
The money companies claim through the tax breaks come with no such strings attached. Stericycle Inc., the medical waste disposal company, expects to get $100 million in tax refunds by the end of the year yet still furloughed 2,300 employees.
Discount airline Allegiant Travel Co. will get $172 million in payroll-support grants and has applied for up to $276 million in additional loans through an airline industry bailout fund included in the CARES Act. But Allegiant, which lobbied Congress on the CARES Act, also expects to get at least $194 million more in tax refunds through the CARES Act tax breaks — money that doesn’t have to be spent on wages or repaid.
Greg Anderson, Allegiant’s chief financial officer, called the CARES Act tax breaks an “efficient mode of increasing liquidity.”
$7 billion — and growing
Corporate tax payments are confidential, so it is impossible to say exactly how much the CARES Act tax breaks have saved companies so far. But to get a sense of the scope, the Orlando Sentinel examined the first-quarter earnings reports for hundreds of publicly traded companies. The newspaper reviewed both financial documents filed with the Securities and Exchange Commission and transcripts of earnings conference calls held with Wall Street analysts.
The CARES Act included a host of tax breaks. To the extent possible, the Sentinel excluded from its calculations tax savings reported by companies from breaks that are only short-term timing shifts or are from new tax credits directly related to the pandemic.
The Sentinel focused instead on savings corporations are reporting from three big corporate income tax-breaks: One that lets them immediately write off the costs of building renovations, another that lets them claim bigger tax deductions related to their debt, and a third that expands their ability to use losses — whether actual losses or paper losses reported only for tax purposes — to obtain refunds on taxes paid in the past or wipe out future tax payments.
Coronavirus Jobs and Economy
SeaWorld seeks federal loan while paying little in U.S. income taxes | Exclusive
Apr 29, 2020 at 9:01 AM
Altogether, the Sentinel found more than 200 publicly traded companies that have reported more than $7 billion in cumulative tax savings. More than 20 reported savings of at least $100 million. More than 110 reported savings of at least $10 million.
The reported savings include a mixture of cash refunds that corporations have already applied for with the IRS and projected future savings.
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The true amount of savings is higher. The $7 billion doesn’t include tax savings for privately held companies. And many publicly traded companies say they have saved money through the CARES Act tax breaks without disclosing how much or say that it’s too soon to know how much they’ll ultimately save.
For instance, troubled airplane manufacturer Boeing Co., which lobbied Congress on the CARES Act, says it is benefiting from the CARES Act income tax breaks. But the company didn’t disclose how much it expects to save, and a company spokesman wouldn’t say.
But other companies are more detailed. Oil refiner Marathon Petroleum Corp. recorded a $411 million income tax benefit as a result of the CARES Act. That’s one of the largest tax savings any company has reported so far.
With oil prices depressed and stay-at-home orders sapping demand for fuel, Marathon reported a $9.2 billion loss for the first quarter. But the company also raised its dividend by 9 percent and paid out nearly $400 million to shareholders. It plans to pay another $400 million to shareholders in June.
A spokesman for Marathon, which lobbied Congress on the CARES Act, declined to comment.
‘We benefited from the pandemic’
While Marathon and many other companies are struggling, the coronavirus pandemic has been profitable for some businesses. Some of them are saving millions in taxes, too.
For instance, drug manufacturer Endo International Plc estimated that COVID-19 actually increased its first quarter sales by roughly $75 million — more than 10 percent — partially from people stocking up on their prescriptions.
Yet even as sales jumped, Endo disclosed a $137.3 million income tax benefit from the CARES Act.
First quarter earnings also jumped at The Hain Celestial Group Inc., a manufacturer of organic foods and personal care products like deodorant. But the company expects to get a $48.4 million income tax refund thanks to the CARES Act.
“Yes, we benefited from the current pandemic. But it's important to note that we were on track to deliver promised improvements based on our performance in the first two and half months of the quarter before the pandemic really changed behavior,” Hain Celestial President and CEO Mark Schiller told analysts on the company’s earnings call earlier this month.
[The latest] Publix’s sales soar by $2.5 billion because of coronavirus pandemic »
The company also said it spent $60 million buying back shares in March and April.
Coronavirus Jobs and Economy
Large hotel, restaurant companies getting small-business loans want to spend less of the money paying workers
Apr 17, 2020 at 10:38 AM
The chief executive at cable and internet provider Altice USA Inc. told analysts that his company doesn’t expect to pay any significant federal income taxes until 2022 thanks to the CARES Act. The company — which reported “record demand” for its broadband service as people sheltered in place and lobbied Congress on the CARES Act — also said it would increase its share buybacks to take advantage of stock market volatility.
Few companies were better positioned for the pandemic than Owens & Minor Inc., a Fortune 500 supplier of medical equipment like surgical drapes and gloves.
In March, Owens & Minor was one of five suppliers chosen by the U.S. Department of Health and Human Services to produce a combined 600 million N95 respirator masks. Earlier this month, President Trump delivered a speech at one of the company’s facilities in Pennsylvania, an important swing state.
Shortly before Trump’s visit, Owens & Minor revealed to its investors that it had filed for a $13 million income tax refund under the CARES Act.
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The company expects elevated demand for its personal protective equipment to continue for the rest of the year. Owens & Minor, President and CEO Edward Pesicka told analysts, “has a bright long-term future.”
A big bonus
The most lucrative corporate tax break in the CARES Act is the provision that allows companies that lose money — whether in real life or only on their tax returns — to take those losses back in time in order to get refunds on taxes they paid in years when they were profitable. The CARES Act lets companies use losses they incurred in 2018 or 2019, or losses they incur this year, to get refunds on taxes paid as far back as 2013.
Congress has used this “carry back” mechanism in past economic downturns, because it is viewed as a way to quickly get money to struggling companies.
But the tax break is far more valuable this time around. That’s because in late 2017, President Trump and the then-Republican-controlled Congress cut the federal corporate income tax rate from 35 percent to 21 percent.
Assurant Inc. shows just how generous this is.
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Thousands of owners of McDonald’s and other big franchises get PPP loans; independent eateries fight back
May 07, 2020 at 11:44 AM
The big financial company, which sells insurance plans and extended warranties for everything from cars to cell phones and lobbied Congress on the CARES Act, reported a tax loss in 2018, according to its executives. It had been planning to use those losses to reduce its tax payments over the next few years.
Under the current 21 percent tax rate, those losses were expected to reduce Assurant’s future tax bills by about $107.1 million.
But after the CARES Act, Assurant decided instead to carry those losses back to 2013 when the corporate tax rate was still 35 percent. The company now expects to get a $186.4 million tax refund — nearly $80 million in extra tax savings.
In some cases, companies are getting a bonus for mistakes made in the past.
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In 2018, for instance, insurance company CNO Financial Group Inc. lost money after it took a $660 million charge to offload some of its exposure to troublesome long-term care insurance policies that covered things like nursing home and prescription drug costs.
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The company had been planning to carry those losses forward and expected they would reduce its future tax payments by $65 million. But after the CARES Act, CNO will carry those losses back to higher tax years instead for a $99 million refund — an extra $34 million in savings.
The CARES Act “lines up perfectly with our circumstance,” CNO Chief Financial Officer Paul McDonough told analysts during the company’s quarterly earnings call.
Earlier this year, AmerisourceBergen Corp., the drug wholesaler that is one of the world’s biggest companies, decided to shut down an unprofitable, problem-plagued drug-compounding business that it had bought in 2015. The company took a huge loss on the move, but at least it would get to recoup a portion of those losses through lower tax payments in the future.
At the time it announced the decision, AmerisourceBergen said it expected the move would generate a tax benefit of between $500 million and $600 million.
But then the CARES Act passed and allowed the company to carry some of those losses back to higher tax years. AmerisourceBergen now says the shutdown will yield a $675 million tax benefit — an increase of roughly $125 million.
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A spokeswoman for AmerisourceBergen would not comment. The company increased its quarterly dividend payment earlier this year and announced this month that it will spend another $500 million buying back stock. The company also lobbied Congress on the CARES Act.
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