Tax Reform: A Work in Progress

Many businesses which form the backbone of the US economy are worried about the Trump tax reform plan and the possible negative effects it could have on the economy.

Sectors of the US economy such as construction, wind power, and electric cars might experience job shrinkage and harm done if the Republican tax plan is enacted as it is now.

The effects of the tax plan, although only in its earliest stages and nowhere near law, have already been felt in the marketplace. Vestas Wind Systems, the world’s largest manufacture of turbines used in wind power, saw its stock tumble by 9 percent. Tesla, the leading electric car maker had a stock downturn as well, closing lower by 6.8 percent. The Trump plan includes cutting the $7,500 tax break for the purchase of an electric car.

Homebuilders are also up in arms over the tax reform. The National Association of Home Builders are taking aim at the Republican’s proposal to remove the tax credit for mortgage payments. The chairman of the association, Granger MacDonald, said that congress was “ignoring the needs of America’s working-class families and small businesses.”

“The bill eviscerates existing housing tax benefits by drastically reducing the number of homeowners who can take advantage of mortgage interest and property tax incentives,” he said.

Some stocks of homebuilders’ companies lost ground. Toll Brothers fell almost 6%, among the worst casualties.

Others are happy with the plan. The US Chamber of Commerce endorsed the plan cautiously, saying the plan was “exactly what our nation needs to get our economy growing faster”, but “a lot of work remains to be done to get the exact policy mix right.”

TSX Worried About Pot Companies with US Business Exposure

A ripe & healthy cannabis plant. Photo courtesy of Cannabis Training University.

The struggle over the legalization of marijuana in the United States has created a bit of uncertainty in the Toronto Stock Exchange’s relationship to US companies that produce the mind-stimulating drug.

Aphria Inc, an Ontario-based producer of marijuana says it met with representatives of the TSX a week ago to talk about the company’s exposure to US markets and the risk that exposure subjects the company to.

Vic Neufeld, CEO of Aphria, said that the company re-committed to working with the TSX as it carefully studies the developments in the United States as they happen. Earlier in October the TSX warned companies that the US federal laws take precedence over the state laws, and, at least right now, federal US law holds marijuana to be an illegal substance. The potential for economic trouble exists for companies like Aphria which have investments in Florida and Arizona, where marijuana is legal for medicinal only and recreational use, respectively.

The TSX said that companies on their exchange that do not comply with US federal law are not in compliance with their requirements to be listed on their exchange.

Neufeld said that he would like to see his company remain on the TSX, and right now has no plans to move Aphria to the more pot-friendly Canadian Securities Exchange. However, if an agreement with the TSX can’t be reached Neufeld said there are other options, such as creating a spin-off for its US business which can be listed separately on the CSX.

The Hartford Acquires Aetna’s Group Life and Disability Business.

The Hartford Financial Services Group, Inc, announced that it will buy the US Group life and disability business from the health insurance company Aetna, Inc for $1.45 billion in cash. Hartford hopes to expand its insurance division and ignite its digital technology strategy.

Hartford shares lost over 5%, falling to $53.63 after they said is would halt their existing buyback in order to pay for part of the deal with Aetna. They added that they will not be repurchasing stock next year as well.

The company said it will use $273 million from its 2017 equity buyback program to fund the deal, and will also use dividends from its holding company resources and insurance units to cover the cost of Aetna’s subsids.

“Hartford is financing the deal by dividends and clearly mentioned that it will not authorize an equity repurchase plan for 2018, driving the shares down,” said John Heagerty, Atlantic Equities analyst.

The deal will insure that Harford is the second-biggest group life and disability insurance provider in the US. They will have over 20 million customers, and the deal will also strengthen the firm’s dealings with mid-sized companies.

Aetna’s divisions will also provide Hartford with access to Aetna’s digital assets. These tools will allow Hartford to more efficiently process worker’s comp and disability claims. Aetna’s assets include an integrated absence management platform.

Companies that Pay the Least Taxes

There are plans to cut taxes for American corporations, slashing the present 35 percent theoretical rate companies are supposed to be. But there is a long road between “should pay” and “do pay.” The following is a list of the more relevant “effective US tax rate” paid by 11 companies that pay the least corporate taxes.

1. Baxter International is a health care company which pays an effective rate of only 2%.
2. Prologis is a REITs company (financial sector) which pays an effective tax rate of 2.3%
3. Pioneer Natural Resources is an energy company with an effective tax rate of 2.3%.
4. Digital Reality Trust- a REITs which pays 2.4% effective corporate tax.
5. Electronic Arts is a technology company paying 2.9% effective tax.
6. Becton, Dickinson is a health care company which pays an effective tax rate of 3.3%
7. Host Hotels and Resorts is a REITs with an effective tax rate of 3.3%.
8. Extra Space Storage pays 3.7% effective tax rate, and is in the REITs sector
9. Micron Technology is a technology company paying 3.7% effective tax rate.
10. Markit is in the industrial sector paying 4.4% effective tax.
11. XL Group is in the financial sector and pays a 4.8% effective tax rate.

Doug Band of Teneo Discusses the Empowerment of Women in the Business World

President of the global strategic advisory firm Teneo, Doug Brand examines the great potential and opportunity empowering women has for the world economy.

Citing a study by Care International, Band asserts that although women are doing 66% of the world’s work (formal and informal) and producing half the world’s food, they are only earning 10% of the world’s income, and own only 1% of the world’s property. Instead of feeling hopeless or helpless about these figures, Band says numbers like this should inspire us to provide more opportunities for the girls and women of the world, not just to improve their lives, but to stimulate entire economies that will benefit all the citizens of the world. The Booz & Co’s Third Billion Index shows that if the employment rates for women were similar to that of men, economic growth around the world could reach an astounding 34%.

In 2005 Band worked with the Clinton administration to create the Clinton Global Initiative. Part of the initiative included women’s issues which are included in the core strategies of a broad range of businesses. Two such ideas prompted by the initiative are WEConnect International and Vital Voices. These programs are designed to bring together an assortment of participants to incorporate more women-owned businesses into corporate supply chains. The goal of the initiative is to increase spending on women-owned businesses by a minimum of $1.5 billion per year by 2018. Such a result would make a great difference on families and economies all over the world.

Band says that efforts to help women attain economic empowerment have been  implemented for decades, and we are now beginning to see some of the positive outcomes. In at least 45 countries around the world there are more girls in secondary school than there are boys. In college women outnumber men in 60 countries worldwide. In the past three decades over 500 million women have entered the workforce, adding significantly to the number of women doing paid work.

Band points out that there is still a lot to do to meet the world economy’s ultimate potential. He believes society is more prepared to meet this challenge now than ever before. We should continue to implement the programs that work, and change the beliefs and attitudes that hold women’s empowerment back.