Why companies like Disney are willing to give out temporary bonuses
You’ve probably seen announcements from Walt Disney and other companies about bonuses recently. Walt Disney recently announced a $1,000 bonus to each of its 125,000 employees. To the average person, this seems like a significant amount. How is Walt Disney able to do this and, more importantly, why?
In 2017, Walt Disney generated $13.79 billion in pretax income on $54.98 billion in sales. On this income the company paid 34.2 percent in domestic taxes or roughly $4.7 billion. This left Walt Disney with a profit of roughly $9 billion. After paying all of their employees and all of their operating costs and all of their taxes, Walt Disney is returning a profit of $9 billion.
The Trump corporate tax plan drops Walt Disney’s corporate tax rate to 20 percent. Under his plan, Walt Disney only pays $2.76 billion in taxes, saving $1.94 billion. A year. Walt Disney gets to keep an additional $1.94 billion/year (assuming years similar to 2017) in profit forever. Over 10 years, for example, this is a benefit of $19.4 billion.
Now let’s look at what their temporary bonus cost them. Disney announced $1,000 bonuses for 125,000 employees. This is a cost of $125 million or 6.4 percent of what they received in one year of tax savings. Over 10 years, it’s 0.6 percent of the nearly 2 billion/year tax break they received.
