Sonoma County companies jump on employee bonus bandwagon after GOP tax cut

Companies across the country have started handing out employee bonuses in the aftermath of the $1.5 trillion tax package signed into law last month by President Donald Trump.

At Comcast and AT&T it was ?$1,000 per worker. North Carolina-based bank BB&T Corp. doled out $1,200 per employee. The benefit was $2,000 per worker at Express Employment Professionals, an Oklahoma City-based staffing company.

Local businesses also are jumping on the bandwagon. Summit State Bank in Santa Rosa has distributed $2,000 checks to its almost 80 employees, while Jordan Vineyard and Winery in Healdsburg gave out $1,000 bonuses to its 85 employees.

“We are a business where we rely on our employees,” said Jim Brush, president and chief executive officer of Summit State, which specializes in serving small businesses and nonprofits.

Yet as typical in these highly polarizing times, the bonuses also have triggered a larger debate on what is the best policy to help workers keep a foothold in the middle class, especially in an area that has one of the highest costs of living in the country. The average median household income in 2016 for the Santa Rosa area was $62,705, according to the Census Bureau.

While no one opposes the bonuses, the crux of the tax cut debate comes down to opposing arguments. Proponents contend the business community will invest the tax break in new equipment and increase compensation for their workers, knowing they must recruit and retain the best talent to grow their companies. This, they argue, will lead to increased consumer spending, spurring economic growth.

President Trump said the recent bonuses are evidence that companies are voluntarily rewarding their workers without new requirements being forced upon them by Washington.

“More than 60 companies have announced they are raising wages, including many that have voluntarily raised their minimum wage to $15 per hour - and I mean they did that voluntarily, which many politicians said could only be achieved by government mandate,” Trump said in a videotaped message to the White House briefing room on Thursday.

Opponents argue that trickle-down economics doesn’t work - as shown recently in Kansas - and that efforts such as an increased minimum wage, greater unionization and affordable higher education do more to help expand the middle class.

The Republican tax package was passed without any support from Democrats, who argued the tax cuts were too targeted to businesses and the wealthy while exacerbating the county’s debt because the legislation was not offset with any spending cuts.

“I’m happy to hear that some people in my district are getting bonuses and I applaud the employers who are awarding them, but we all deserved better than a hastily-written tax bill passed along party lines that adds $2.3 trillion to our national debt,” said Rep. Mike Thompson, D-St. Helena, who is a member of the Ways and Means Committee that has oversight on tax matters.

John Jordan, owner of Jordan Winery, mostly sees pluses even though the tax cut would likely have a negligible effect on his own business, which produces around 100,000 cases of wine annually.

Jordan started an effort called 1Country1K to urge fellow business owners to pledge $1,000 bonuses to each employee. He noted that if 5,000 small businesses that each have approximately 200 employees join the cause, $1 billion would be pumped into the American economy even before workers see more in their paycheck within the next two months as withholding tables change.

“The heart of any successful business is its employees,” said Jordan, a supply-side proponent who also appears as a political commentator on Fox News and has studied the tax package. In his campaign, Jordan has urged other businesses such as GoPro, Bass Pro Shops and Wynn Resorts to take up the pledge.

Jordan noted in the highly competitive wine industry, he has to keep up perks to recruit and retain employees, such as providing every employee a 10 percent bonus for Christmas and $20,000 checks to those who lost their homes in the North Bay fires.

“I want to identify top talent,” said Jordan, who boasted that he has hired people who started at $12 an hour and now make six-figure incomes. “I hire people for two or three jobs down the road.”

Wineries will benefit under the bill with a special provision that reduces their excise tax. A winery that produces more than 50,000 cases annually could save $21,000 a year, according to the Wine Institute, a trade group for California wineries.

But Jordan said his winery will benefit minimally from the wine provision, compared to ones in Napa Valley, because it does not produce high-alcohol wines that received the biggest tax breaks.

Jordan Winery is classified as an S corporation, which are businesses that pass income and losses through to their shareholders for federal tax filing purposes.

While the tax package gives a 20 percent deduction for such pass-through income, Jordan said he will be penalized by being located in a high-tax state such as California because the tax package also greatly limits state and local deductions.

“I have friends who are trying to find ways to leave” the state, Jordan said.

At Summit State, the tax package will help because one of its main provisions reduces corporate taxes from 35 percent to 21 percent. The banking industry benefited more than other sectors from the bill because banks tend to have fewer deductions, so the reduced rate provides greater relief compared to other industries. Brush estimated that it would save the bank around $500,000.

“Banking is really a people business when you get down to it,” he said.

Brush emphasized that the bank didn’t want to get caught in the political debate, but gave the bonuses for its own self-interest because he noted that it is common for banks to raid other financial institutions in hiring.

“Banking is incestuous,” Brush said. “Everyone has worked for another bank before.”

As it ramped up its hiring, the bank already raised its entry level pay to at least $15 an hour, though that move only affected a few employees, and also relaxed its outdated dress code that had details on corduroy outfits and the length for cuffs on dress pants.

Even critics of the GOP tax bill don’t knock the bonuses. “There’s nothing wrong with companies giving bonuses to their employees,” said Jack Buckhorn, executive director of the North Bay Labor Council. “

The Economic Policy Institute, a liberal Washington, D.C., think tank, contends that 83 percent of the benefits will go to the wealthiest 1 percent of Americans when the bill is fully implemented and that most of the corporate savings will go to stock dividends and executive salaries.

Opponents of the Republican tax bill have other ideas how to boost wages. The labor council in the new year will continue focusing on efforts to raise worker wages, even though California is scheduled to have a $15 minimum wage go into effect by 2022.

“We know that much more is needed,” Buckhorn said. The labor group is looking at a campaign to speed up the local timetable for the $15 minimum wage to go into effect within the next two years, with both Novato and Santa Rosa as possible targets, Buckhorn said.

It also wants to keep the momentum for union organizing within the growing hotel sector. Local unions got representation at a third Sonoma County hotel this year, the Hyatt Regency Sonoma Wine Country.

“It’s no secret it’s one of the areas we are going to focus on,” Buckhorn said.

Robert Eyler, an economics professor at Sonoma State University, said the bonuses “are more of a PR move” than anything else and that past history suggests the Trump tax cut will not result in an “amazing amount” of growth. “We might get a sprinkle instead,” he said.

Still he applauded the effort.

“At the end of the day, it’s always great for companies giving back to employees,” Eyler said.

You can reach Staff Writer Bill Swindell at 707-521-5223 or bill.swindell@pressdemocrat.com.