This may shock you, but giving large companies special tax deals doesn’t magically lead to full employment and economic paradise. The Wall Street Journal reports that both AT&T and Verizon started receiving huge tax breaks starting in 2008 as part of a stimulus package and since then have actually reduced their combined employee counts by around 100,000 people. The particular tax break in question is known as “bonus depreciation” and it essentially allows companies to more quickly offset their total income with the money they invest in doing things like building factories or upgrading their networks.
With Congress poised to extend a raft of tax breaks, consider this: One such break has helped AT&T Inc. and Verizon Communications Inc. slash their recent tax bills by billions of dollars without leading to the intended increase in investment or jobs. The measure, known as “bonus depreciation,” lets companies offset their income with investments they have made more quickly. It was enacted in 2008 as part of the economic stimulus package with the goal of giving companies an incentive to build more factories or upgrade more equipment, creating jobs and giving a boost to sluggish economic growth in the process. But that isn’t how it has worked, at least at AT&T and Verizon, whose vast networks of towers and cables make them two of the country’s biggest investors in infrastructure. AT&T estimated its federal tax bill last year at $3 billion, down from about $5.9 billion in 2007, before the tax relief was enacted. Verizon estimated that it would get $197 million back last year, compared with a 2007 bill of $2.6 billion.