Kevin Hancock, president of Hancock Lumber. Behind him is his company’s sawmill in Casco, Maine, and company land with stands of Eastern White Pines.
Brian Fitzgerald Kevin Hancock, president of Hancock Lumber. Behind him is his company’s sawmill in Casco, Maine, and company land with stands of Eastern White Pines.

Tax reform ranks among the biggest things in LBM life that are both extremely significant and extremely confusing. That's why Kevin Hancock, CEO of Hancock Lumber, felt it was important to write to his leadership team with his views regarding how the recently enacted tax changes could affect the company. Here, with his permission, is the memo from the 2017 ProSales Dealer of the Year.

Hello! Just a few early thoughts from my perspective about tax reform. It is important to be able to have accurate and transparent discussion with people both inside and outside our company. The discussion in D.C. is so politicized that people never really see the actual math, they just hear rhetoric.

The reform has nothing to do with 2017. It kicks in in 2018.

The government is not sending us any money (only confused Congressional leaders could possibly explain it that way). Beginning in 2018 we are going to be able to keep a slightly larger % of the money we earn from the value we create.

In 2017 our effective tax rate is 38% ... meaning. ..t hat when we earn a dollar, the government (state and federal) gets 38% of that dollar and we keep 62%.

In 2018 we are forecasting our effective tax rate to be 28% ... meaning that next year when we earn a dollar the government gets 28% of that dollar and we keep 72%.

A dollar is never idle. Someone always has it and always does something with it. With the new corporate tax structure companies are going to be able to keep a bit more of the money they earn from the value they create and then reinvest that money locally. The same amount of money is in circulation before and after the tax reform. It's just a question of letting local people and companies keep a bit more of their own money and redeploy it on their own terms.

Tax reform definitely makes our company a little bit stronger because we can keep and use more of our own money.

  • We will be able to pay down debt a bit faster.
  • We will be able to reinvest in the business a bit faster.
  • We will be able to create jobs a bit faster.
  • We will be able to do profit sharing a bit faster.
  • We will be able to grow the company a bit faster.
  • We will be able to weather the next slow down or recession a bit better.

Every one of these bullet points benefits employees, customers, vendors, investors and the local communities we serve either directly or indirectly.

To some degree it's like, do you think a dime spend in Washington is deployed more efficiently than a dime spent locally by Maine companies and Maine families?

28% (the next tax rate) is still a GREAT deal for government. We take 100% of the risk. We do 100% of the work. Government gets 28% of the benefit.

Some level of taxes are good and necessary and we are proud and happy to pay them. This legislation is just about creating a bit more balance and fairness for local companies.

My favorite current example of how high taxes currently are comes from our Christmas bonus this year. Christmas bonuses totaled $73,000 (netting everyone $150). To give employees $73,000 after taxes for Christmas cost Hancock Lumber and the employees an additional $53,000 in taxes and government program fees. It cost $126,000 to give out $73,000. Said differently, employees got 53% of the payout and government got 42%.

This reform will allow us to slightly accelerate our plans in 2018 and as we see a clear path to do that we will help make sure everyone gets examples of how it is helping us positively. In the meantime, this should help support healthy communication.

Thank you!