How Disney Just Failed Its Employees Miserably
Disney made big news recently when it decided to hand out one-time bonuses worth $1,000 to all of its employees. Thanks to the Trump tax plan, the company says it can finally afford to give out these bonuses. Disney has been praised for being forward-thinking with its newfound windfall, which comes as a result of the drastic cut in the corporate tax rate. Finally, a company that isn’t giving all the rewards to the shareholders. It’s actually sharing the profit with the producers.
But digging a bit deeper, we find that Disney isn’t being quite as generous as it wants you to think. We looked at why the one-time, $1,000 bonus is actually a pretty insulting gift to the people who work hard to make Disney so great.
Lowering the corporate tax rates
First, let’s take a look at what actually happens for corporations like Disney in the Trump tax plan. As of Jan. 1, 2018, the corporate tax rates will permanently move from 35% down to 21%. If you were concerned about the effect on those poor hedge fund managers, fear not. They’re going to be fine, according to Reuters.
Leaves in place “carried interest” loophole for private equity fund managers and some hedge fund managers, despite pledges by Republicans including President Donald Trump to close it. These financiers can now claim a lower capital gains tax rate on much of their income from investments held more than a year. A new rule would extend that holding period to three years, putting the loophole out of reach for some fund managers but preserving its availability for many.
The major point of interest for Disney, however, is the corporate tax rate. It’s likely that it was using loopholes to pay less than 35% before, but in theory, it had its federal taxes cut by 40%.
Next: Exactly how much is Disney spending?
Bonuses and a higher education initiative
For Disney, using the extra cash it’s projected to receive in 2018 to hand out bonuses was a no-brainer. The employees get a little extra, and the company gains a little extra positive PR. Here is what The Wrap said about Disney’s attempt at altruism, according to an internal memo.
The Walt Disney Company announced Tuesday it will give a one time, $1,000 cash bonus to 125,000 U.S.-based employees, for a whopping total of $125 million. And according to an internal memo obtained by TheWrap, Disney CEO Bob Iger said the bonuses come “as a result of the recently enacted tax reform” passed by Republicans in December.
Disney also is starting a higher education initiative for hourly associates, dropping an extra $50 million. All in all, the company is using around $175 million in new investment in its employees, all thanks to the Trump tax plan.
Next: Let’s look at Disney’s revenue.
Disney’s revenue in 2017
Disney makes a whole lot of money. Through its media, merchandise, and theme parks, Disney is one of the most recognizable brands in the entire world. It announced record revenue in 2017, making over $55 billion. The split is somewhat interesting, with around $23 billion coming from media and over $18 billion coming from parks and resorts.
According to Indeed, the salaries of those who work for Disney have a wide range. For example, a housekeeper makes around $20,000 per year. Ride operators, cashiers at resorts, and cast members make around $10 per hour. There are plenty of employees at Disney who make quality salaries, such as those in marketing, management, and software development. But the vast majority of the employees are living paycheck to paycheck.
Next: Doing the math on Disney’s projected savings
Disney’s actual projected savings
It seems extremely likely that Disney will outdo its 2017 revenue in 2018. However, it also came in around $55 billion in 2016 and just over $50 billion in 2015. So let’s go ahead and assume that Disney makes another $55 billion in revenue yet again in 2018.
Assuming that Disney paid 35% in federal taxes in 2017 – extremely unlikely – we can easily calculate how much it paid to the government: around $19 billion. Dropping its rate on the same amount of revenue to just 21% takes its total to about $11.5 billion, or $7.5 billion of savings thanks to President Trump and the Republicans in Congress.
Next: How much could it really afford to share?
How much Disney could reasonably afford to share
The $175 million that Disney is investing into employees is definitely more than nothing, but comparatively, it could afford to be a lot kinder. While that housekeeper who makes $20,000 per year will now make $21,000 in 2018, Disney is actually only paying slightly more than 2% of its projected tax savings to employees.
To put that in better perspective, more than $7.3 of the $7.5 billion in projected tax savings is still left after the “generous” gift to the employees. If Disney wanted to share just one quarter of that windfall with their 125,000 employees, they could pay out $15,000 to each employee in 2018.
And again, that new corporate tax rate is permanent. Assuming Disney makes that same, static $55 billion in revenue, it could afford to pay everyone $15,000 more annually while still hauling in an extra $5.6 billion each year. All thanks to President Trump.
Next: Chase hands out some raises.
Other companies spending money on employees
Disney isn’t the only company touting the bonuses it’s handing out, all thanks to the generous Republican tax reform. JP Morgan Chase is raising its average wages to a range from $15 per hour to $18 per hour for its 22,000 employees. It’s also opening 400 new branches, which is an increase of nearly 8% in total branches for the company.
JP Morgan Chase has consistently made around $90 billion in revenue each year the last several years, and assuming they do so again in 2018, they’ll have $12.6 billion in tax savings under the new corporate rate. If every Chase employee receives a $3 per hour raise and works 40 hours per week, they’re spending $137 million on raises.
That’s only around 1% of its tax savings being spent on raises for current employees, but of course they’re also adding countless jobs with new branches. Chase is doing slightly better than Disney, but could also afford to be much more generous.
Next: The Disney monopoly
Disney becoming a monopoly
Disney is becoming so much more than just Mickey Mouse and theme parks. Back in 2012, it purchased Lucasfilm and the rights to the entire Star Wars franchise from creator George Lucas. That has created a Star Wars revival, with movies planned yearly from here to eternity. Disney also recently cut a $52 billion deal to purchase 21st Century Fox, which comes just in time for its rumored streaming channel that could rival Netflix.
The company will have the rights to everything from Fox, including The Simpsons, as well as the X-Men movies, Deadpool, the entire Marvel Cinematic Universe, and of course everything related to Star Wars and Disney. Who wouldn’t pay $10 per month for that streaming channel? Disney is becoming a monopoly, and its future is bright. It will be making plenty of money, even without Trump’s tax gift.
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