Last September, Crikey first reported an interesting study in the US that examined what large corporations had done with windfall profits: they’d cut staff and used the windfalls for share buybacks that boosted the share price of the companies (and increased executive bonuses).

This was actual evidence of what companies might do with the tax cuts Donald Trump had promised them — and what companies would do with similar tax cuts in Australia — when actual evidence from tax cut proponents was impossible to find. But we never thought the study would be backed up by companies themselves actually admitting that they would do this. We were wrong; US CEOs began saying exactly that even before the tax cuts were passed by Congress late last year.

Overnight, another major US CEO has said he’ll be using the tax cut for share buybacks. This is Bank of America CEO Brian Moynihan to investors less than 24 hours ago on what BoA will do with the Trump tax cut:

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Most of the benefits will fall to the bottom line and be used to return to shareholders.

And we’re not talking about a small sum. According to Reuters, “the lender expects its effective tax rate this year to be around 20 percent, 9 percentage points lower than 2017”. That’s on earnings of over US$5 billion.

So who will be the first Australian CEO to admit that if they ever get the tax cut Malcolm Turnbull is desperate to give them, they’ll blow it goosing their share price? Or do local CEOs not have the honesty of their US counterparts? Perhaps some investment analysts should put the question to CEOs on the next earnings conference call?

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Australia has spoken. We want more from the people in power and deserve a media that keeps them on their toes. And thank you, because it’s been made abundantly clear that at Crikey we’re on the right track.

We’ve pushed our journalism as far as we could go. And that’s only been possible with reader support. Thank you. And if you haven’t yet subscribed, this is your time to join tens of thousands of Crikey members to take the plunge.

Peter Fray
Peter Fray
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