Donald Trump: Deal Maker, Part 1: Carrier

One thing is for certain: Donald Trump claims to make “a lot of deals,” the “best deals,” and “great deals.”   Just how great of deals does he make?  Let’s look into the Carrier deal as an example.

Trump’s Carrier Deal Promise

While still President-elect, Donald Trump and Mike Pence worked to prevent the Indiana company, Carrier, from leaving the United States after threatening to take their 2,000 jobs to Mexico.  Donald first stated that if Carrier moved their jobs to Mexico they would be hit with a giant tax if they left the country.   On “Meet the Press” he was quoted as saying, “It could be 25 percent, it could be 35 percent, it could be 15 percent, I haven’t determined” (Slate).

Carrier has estimated revenue of $12.2 billion (Hoovers.com).  On the low-end (15%) that would mean the US would gain an additional $1.8 Billion in taxes if carrier moved out of country.  On the high-end (35%) it would mean the US would gain an additional $4.3 billion in tax dollars, according to Donald Trump’s promise, if Carrier left.

The financial loss of 2,000 jobs in the refrigeration industry can be estimated by taking the average Carrier Corporation salary.  Salaries at Carrier range from approximately $26,835 per year for a Production Technician to $103,270 per year for a Territory Manager(Indeed.com).

Although there are more Production Technicians than Territory Managers Carrier, for simplicity’s sake let’s use an average between the two for an average salary of $65,053.  Calculating out 2,000 jobs at an average salary of $65,053 comes out to $130 million taken out of the US economy if Carrier would leave the country.

That would mean that if Carrier left the US would gain $1.8 – $4.3 billion, minus the $130 million we would lose in salaried pay.  According to Trump’s statement, the US would come out with a $1.7 – $4.2 billion gain in capital if Carrier left and we taxed them.

Trump’s Actual Deal

Trump actual deal with Carrier was to keep 43% of their working staff in the United States to make their refrigeration products, but in return agreed to pay Carrier $7 million in tax breaks (Wall Street Journal).

The calculation of the loss of 1,300 employees at the same estimation of $65,053 comes to a total of $84.5 million taken out of the US economy.  The value of keeping the 700 employees (instead of losing them all) at the same average salary comes out to $45.5 million. Subtract the $7 million  from the value and the deal ends up costing Americans $38.5 million.

Trump’s Promise versus Actual Deal

After visiting Carrier, Donald Trump promised, “Companies are not going to leave the United States anymore without consequences” (Washington Post).  Trump then brokered with Carrier where 57% of their workforce left, and it cost American taxpayers $38.5 million dollars.  Since only 57% of the company left, let’s use Trump’s promise of a tax from 15-35% of only 57% of Carrier’s net income.  57% of 12.2 billion in revenue that would have a charge for moving out of the US would be $7 billion.  $7 billion taxed at 15-35% is a range of $1.5 – $2.5 billion.

From there we can say that according to Trump’s promise Carrier’s “consequence” should have meant Carrier would be taxed $1.5 to 2.5 billion, with a “b,” for their actions.  Instead we paid them $7 million.  Not only is this deal not what Trump promised, but this cost our country $38.5 million dollars after taking everything into account to keep Carrier within our border.

Conclusion

Since the promised return was an average of the U.S gaining $2 billion dollars for Carrier moving and we ended up paying them $38.5 million dollars, a loss to the US.  That means Trump delivered on -0.02% of his promise, an actual negative percent on his promise.

It is fair to state anything that costs a country more money than it is worth, much less is a negative percent to a deal maker’s projected promise, should be considered a bad deal.

 

Check back tomorrow when we look in-depth at the Ford deal.

4 thoughts on “Donald Trump: Deal Maker, Part 1: Carrier

  1. The income tax revenue on 700 emplyees @ $65k per yr (25% tax bracket) would be $11,375,000. Minus the $7 mil credit and you have a revenue of $4,375,000 in yr 1.

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    1. This is a very valid point that you’re making that I did not bring into my equation.

      Lets also look at the 1,300 employees earning $65k per year being taxed at 25%. Losing them would be a tax loss of $21,125,000. Adding how much tax he “saved” versus the tax he “lost” would mean the US is losing $16,750,000 in year one and losing $9,750,000 for every year after that.

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      1. You’re looking at this in an entirely glass half empty view. Is it better to lose 100% or keep 53%. Without the deal, we have nothing.

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      2. I’m looking at what our net gain and loss was compared to what was promised.

        We can argue about saving or losing, but at the end of the day Trump promised billions of dollars in revenue if the company left.

        Instead they cost us money and had more than half their leave. There are no taxes on these goods, rather they were given takes breaks.

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