The changes in corporate tax from 35% to 21% plus the decrease of tax on money held outside the US to 15% affect companies differently.  The first part of the changes is companies will report lower earnings, but if they manage to do nothing differently and end up with the same market share, their profits will be up 15%. In the economic texts or basic books about economics that is not taught, because it is a one-off or bonus to the company.

The biggest private sector employer in the US is Wal-mart and most people have visited and shopped there for 90% of Americans live within 10 miles of one of the 4,700 stores.  It is hard not to shop there. In mid January, Wal-mart as reported by Nandita Rose of Reuters Wal-mart is raising the minimum wage in the stores. Wal-Mart employs 2.2 million people globally with more than 1.5 million in the US and global revenue was nearly $500 billion.

Their explanation for the increase was due to the tax code changes, but it reality it is because there is a tight market for low wage workers. Wal-Mart has traditionally paid the bulk of its workers (in the store) at the lowest rate mandated by the state. Initially people apply to work there, but because it hard to meet the bills, Wal-Mart has a high turnover of people. One method to keep people is raise the pay. If someone is at the lowest rate, they likely have another job and once that other job offers more hours, the lower wage company suffers. Edward Jones analyst Brian Yarborough said, given how low unemployment is, Wal-Mart was expected to hike wages, the tax bill made it easier.

Retailers in general have one of the highest effective rates because most of their operations are within the US. It should be noted with 4,700 stores, Wal-Mart constantly adjusts their stores and recently closed 63 Sam’s Clubs.  Wal-Mart is expected to save billions from the tax cut.

Linking to dividend paying stocks, while we all hope the company is a good citizen both from a corporate point of view and paying their employees, Wal-Mart has traditionally been a better company to own than work for. It is a place where many shop for low prices – many of the products come from China (and the President does not seem to connect the trade imbalance with Wal-Mart bringing in manufactured goods).  The model for Wal-Mart because it has and continues to work is something to be studied and learned from but do not buy the platitudes of how it values its workers.

There are more questions than answers, till the next time – to raising questions.