AT&T, Verizon Tax Breaks Fail to Produce Jobs

With Congress poised to extend a raft of tax breaks, consider this: One such break has helped AT&T and Verizon Communications slash their recent tax bills by billions of dollars without leading to the intended increase in investment or jobs.

The measure, known as “bonus depreciation,” lets companies offset their income with investments they have made more quickly. It was enacted in 2008 as part of the economic stimulus package with the goal of giving companies an incentive to build more factories or upgrade more equipment, creating jobs and giving a boost to sluggish economic growth in the process. But that isn’t how it has worked, at least at AT&T and Verizon, whose vast networks of towers and cables make them two of the country’s biggest investors in infrastructure. The companies have kept their capital spending relatively flat since the stimulus was adopted, and their employee count has dropped by more than 100,000 people, a fifth of their combined work forces. The outcome isn’t a matter of gaming the tax system. AT&T and Verizon appear to be using the benefit as intended, and both are plowing tens of billions of dollars into their networks. It is possible their spending would have been lower if they hadn’t had the extra tax incentive. But the results do raise questions about whether extending bonus depreciation is an effective way to spur growth.