The New York Times responded to FedEx on Monday after the courier delivery service challenged the left-wing newspaper to a public debate over tax policy. FedEx had responded to the Times alleging in an article that FedEx no longer paid taxes under President Donald Trump’s tax-cut bill.
“FedEx’s colorful response does not actually challenge a single fact in our story. We’re confident in the accuracy of our reporting,” Times spokesperson Danielle Rhoades Ha said in a statement. “FedEx’s invitation is clearly a stunt and an effort to distract from the findings of our story.”
The Times statement came in response to a statement from FedEx CEO Frederick Smith, who challenged the Times to a debate on Sunday in response to their story, saying in a statement:
The New York Times published a distorted and factually incorrect story on the front page of the Sunday, November 17 edition concerning FedEx and our billions of dollars of tax payments and billions of dollars of investments in the U.S. economy. Pertinent to this outrageous distortion of the truth is the fact that unlike FedEx, the New York Times paid zero federal income tax in 2017 on earnings of $111 million, and only $30 million in 2018 – 18% of their pretax book income. Also in 2018 the New York Times cut their capital investments nearly in half to $57 million, which equates to a rounding error when compared to the $6 billion of capital that FedEx invested in the U.S. economy during that same year.
I hereby challenge A.G. Sulzberger, publisher of the New York Times and the business section editor to a public debate in Washington, DC with me and the FedEx corporate vice president of tax. The focus of the debate should be federal tax policy and the relative societal benefits of business investments and the enormous intended benefits to the United States economy, especially lower and middle class wage earners.
I look forward to promptly hearing from Mr. Sulzberger and scheduling this open event to bring further public awareness of the facts related to these important issues.
It is worth noting that the Times did not appear to dispute the allegations from Smith that the newspaper did not pay any federal income taxes in 2017 on earnings of $111 million.
After Smith released his statement, FedEx released an independent statement responding to The New York Times story:
The New York Times article is a deliberate distortion of our company’s actions before and after tax reform. FedEx has paid federal income tax every year, including fiscal year 2018. Following passage of the Tax Cuts and Jobs Act (TCJA), FedEx invested billions in capital items eligible for accelerated depreciation and made large contributions to our employee pension plans. These factors have temporarily lowered our federal income tax, which was the law’s intention to help grow GDP and generate investment in the U.S. The accelerated depreciation deductions are only temporary with higher depreciation and lower taxes early in the life of a new capital asset. This is then offset by lower depreciation and higher taxes later in that asset’s life. These temporary deductions FedEx received for capital investments are minimal compared to the overall impact the company has on the economy.
FedEx made extensive investments in our team members and our global network to better serve our customers following passage of the TCJA. These investments included a voluntary contribution of $1.5 billion to the FedEx pension plan to ensure it remains a well-funded retirement program, more than $200 million in increased team member compensation – about two-thirds of which went to hourly team members – and more than $3 billion to significantly expand and modernize our Memphis and Indianapolis hubs through 2025.
FedEx takes pride in paying its full share of taxes and has paid almost $10 billion in total taxes in the U.S. during the last five fiscal years, contributing to tax revenues of the U.S. government. We have supported tax increases in some cases, particularly federal diesel and gasoline taxes, to fund badly-needed infrastructure in the United States. The decrease in U.S. investment over the past year is due to the slowdown in global trade which has a significant impact on the asset-intensive industrial economy, including FedEx.
The statements from Smith and FedEx came in response to the Times reporting on Sunday that FedEx went from paying $1.5 billion per year in taxes to paying nothing after Trump signed the tax cut bill into law.
“In the 2017 fiscal year, FedEx owed more than $1.5 billion in taxes. The next year, it owed nothing. What changed was the Trump administration’s tax cut — for which the company had lobbied hard,” the Times reported. “The public face of its lobbying effort, which included a tax proposal of its own, was FedEx’s founder and chief executive, Frederick Smith, who repeatedly took to the airwaves to champion the power of tax cuts.”
“Four months later, President Trump signed into law the $1.5 trillion tax cut that became his signature legislative achievement. FedEx reaped big savings, bringing its effective tax rate from 34 percent in fiscal year 2017 to less than zero in fiscal year 2018, meaning that, overall, the government technically owed it money. But it did not increase investment in new equipment and other assets in the fiscal year that followed, as Mr. Smith said businesses like his would,” the Times added. “Nearly two years after the tax law passed, the windfall to corporations like FedEx is becoming clear. A New York Times analysis of data compiled by Capital IQ shows no statistically meaningful relationship between the size of the tax cut that companies and industries received and the investments they made.”