By Mike Murphy
FedEx Corp. Chief Executive Fred Smith had a combative response to a New York Times report that detailed how the delivery giant cut its tax bill to zero: Debate me!
The Times on Sunday reported that, between 2017 and 2018, FedEx /zigman2/quotes/203047719/composite FDX -0.06% cut its tax bill from $1.5 billion to zero, as its effective tax rate sank from 34% to less than zero. The Times said the savings came after intense lobbying by the company — and Smith in particular — for the Trump administration’s tax cuts. Citing financial filings, the Times reported that FedEx paid no taxes in fiscal 2018, and has saved at least $1.6 billion so far thanks to the tax cuts, after paying $2 billion in federal income taxes over the previous 10 years.
The tax cut was supposed to encourage capital investments by companies, but the Times reported that FedEx spent less on capital investments in 2018 than it did in 2017, and is spending even less this year, while sending most of the tax savings on to shareholders through buybacks and dividends.
In a statement Sunday night , Smith swung back, calling the Times report “a distorted and factually incorrect story,” without identifying what specifically was incorrect, and challenging the Times’ publisher and business editor to a public debate.
“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,” Smith said. “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.”
Smith also claimed the Times /zigman2/quotes/202090840/composite NYT -0.22% paid zero federal income tax in 2017 and “only” $30 million in 2018, while cutting capital investments.
As of 11 p.m. Eastern on Sunday, the Times had no immediate response to Smith’s challenge.