Working- and middle-class Americans standing by for those corporate-tax-cut-fueled wage increases to appear now understand how Vladimir and Estragon felt in Waiting for Godot.
It’s been nearly four months since the Tax Cuts and Jobs Act became law, and the good times continue to roll for shareholders and company executives. Corporate profitability is well on its way to hitting decade-long highs, and CEO pay, coming off of a record year in 2017, will be the cause of much champagne-popping. But if the new tax bill, which showered corporate America with an estimated $68 billion in savings, has been a party for Wall Street, folks on Main Street—the supposed primary beneficiaries of the tax-cutting bonanza, as Republicans told it—have yet to receive their invitations.
A new online database launched by Americans for Tax Fairness (ATF), a broad coalition of more than 400 groups championing progressive tax reform, tracks how corporations have responded to the new law. The ATF website, entitled “Trump Tax Cut Truths,” contains information on more than 800 companies, including the amount of tax savings those companies received along with details on planned bonuses, pay raises, and stock buybacks. The information is sourced from news articles, press releases, public corporate filings, independent analysis, and ATF research.
The data make clear that the rosy picture of the tax plan painted by congressional Republicans and the White House bears little resemblance to its actual effects.
President Trump promised that corporate tax cuts would bring a $4,000 pay raise to the average American worker. So far, however, only about 4 percent of workers have received one-time bonuses, while approximately 1 percent of workers have received a raise at all, according to the ATF database.
Many of those seemingly generous bonuses deflate under close inspection. Companies like Walmart, Lowes, and Home Depot tied the size of bonuses to their employees’ tenure, effectively limiting the bonuses to a small number of their workers. Notoriously, Disney dangled the prospect of bonuses to their employees, only to yank them back to use as leverage in union negotiations over higher wages.
This stinginess towards workers has left plenty of tax windfall still to be accounted for. Of the estimated $60.8 billion in tax cuts received by 126 companies, only $6.5 billion has gone toward pay raises and one-time bonuses (that may not be paid in full anyway). So where have the tax cut gains gone?
Not surprisingly, to stock buybacks. Through the process of repurchasing their own stocks, corporate executives can enrich shareholders and, plushly, feather their own nests (since CEO pay is often linked to increases in the value of the company’s shares). The practice, which has overtaken paying dividends as corporate America’s favorite way of dishing out profit, has gone into high gear thanks to the GOP tax law. Authorizations for stock buybacks have increased by $238 billion since the tax law was passed, and they don’t look to be stopping. JPMorgan Chase strategists estimated in March that share repurchase totals were on pace to reach a record $800 billion in 2018, up from $530 billion last year.
Corporations have spent 37 times more on stock buybacks than they’ve spent on bonuses and wages, according to ATF—and that number is just from the companies whose data is available. Multiple unions have filed formal information requests with companies that have largely kept employees and the public in the dark over their plans for their tax savings, to little success.
Workers interested in what a real raise looks like only need to tilt their heads way back: CEO pay is up. According a report released Wednesday by board and executive compensation research firm Equilar, CEO pay is now at its highest level since 2007, just before the financial crash. Many of those CEOs received hefty pay bumps and bonuses despite middling performance. The practice of boosting profitability through stock repurchasing has further severed the link between executive performance and executive pay.
It has also exacerbated economic inequality. Close to 85 percent of all stocks owned by Americans, including pensions plans, IRAs, and 401(k)s, belong to the wealthiest 10 percent of households, according to a recent research paper published by New York University economist Edward N. Wolff. Roughly half of all households hold no investments in stocks at all.
American workers might feel a sudden sensation of déjà vu in the coming months. Like the Bush tax cuts before it, the Tax Cuts and Jobs Act is a thinly veiled giveaway to the already-rich, dressed up as a middle-class stimulus. When it comes to Republicans’ trickle-down vehicles, the essential—as Vladimir remarks while waiting for Godot—doesn’t change.
Tax Cuts for the rich. Deregulation for the powerful. Wage suppression for everyone else. These are the tenets of trickle-down economics, the conservatives’ age-old strategy for advantaging the interests of the rich and powerful over those of the middle class and poor. The articles in Trickle-Downers are devoted, first, to exposing and refuting these lies, but equally, to reminding Americans that these claims aren’t made because they are true. Rather, they are made because they are the most effective way elites have found to bully, confuse and intimidate middle- and working-class voters. Trickle-down claims are not real economics. They are negotiating strategies. Here at the Prospect, we hope to help you win that negotiation.