Corporations Hoard Their Trump Tax Windfall
After President Trump signed the GOP tax plan into law, some of the bill’s corporate beneficiaries have offered workers minor bonuses. But economist Bill Black says they’re keeping most of the money for themselves — and starting a new global race to the bottom for corporate taxes
AARON MATÉ: It’s The Real News. I’m Aaron Maté. President Trump has signed the Republican tax bill into law, which among other things imposes a permanent corporate tax cut, and ends the individual insurance mandate under Obamacare, threatening the health insurance of millions of people. After adding his signature, Trump reportedly told diners at his Mar-a-Lago Resort in Florida, “You all just got a lot richer.” And some corporations are already sharing the wealth. Many have announced small wage increases for employees and one-time bonuses, leading supporters of the tax bill to declare that the “trickle-down” theory behind it is already working.
Bill Black is professor of economics and law at the University of Missouri, Kansas City. Welcome, Bill. First, your response to Trump signing this bill, and then telling diners at his resort, “You all just got a lot richer.”
BILL BLACK: Yes, that was one of his rare truthful statements. To buy into a Mar-a-Lago property, you have to be wealthy. You will recall that he claimed that during the run-up to the vote on the bill that it had nothing in it for the wealthy, and that the wealthy were really upset with him, and that there was nothing in the bill for him. All of those things were lies, but the Mar-a-Lago set is definitely very happy.
AARON MATÉ: And this ploy we’ve seen so far from corporations announcing some small wage hikes and one-time bonuses of $1000 dollars. When you see that and you see the celebration of it, the people pointing to it as proof that the tax cut is already paying off for workers, how do you take that?
BILL BLACK: Well, it’s excellent politics, and really terrible reasoning. To give you some idea of the scale of things, Bloomberg just came out with a column just as we’re taping this that says that the wealthiest 500 people in the world had their wealth increased but one trillion dollars last year, four times the rate of 2016. That gives you some idea of the scale of these things. This is a trillion-plus that is going to go overwhelmingly to the wealthy.
But ask yourself … I’m a policy wonk type. I can’t remember after President Obama was able to get the stimulus bill passed, which was roughly $700 billion in stimulus, a single ribbon cutting where he attended and announced the following great dam had been built, or bridge had been built, or portion of the highway had been built and such.
Trump learned that lesson, so he claims credit even when there is no credit, and he did this from the very beginning. Remember at the beginning of his presidency, he met famously with Carrier Corporation to announce how they were going to keep jobs in the United States. Well, you had to be a super wonk to know that a couple of weeks later it came out actually he was cutting, Carrier was cutting jobs and sending them to Mexico. And they did the same thing with SoftBank, where they said, “Look at this big hiring decision and expansion by SoftBank, which of course had been planned over six months prior, and was based on the economic recovery under President Obama. So Trump is absolutely going to claim credit for these things, even when there’s nothing to claim.
So you have the usual suspects, plus some that are hilarious. So you’ve got Wells Fargo, which of course is one scandal after another in ripping off the customers, and what they’re going to do is they have a very tiny portion of their work force that doesn’t make the minimum wage, and they had already announced that they were going to bring them up. Well, they did a hoopla about all of this, how they were going to raise the workers that didn’t meet the minimum wage of $15 an hour, and claim credit for that, and said they’re going to make some donations as well.
Well, meanwhile they’re going to make in the many billions of dollars because of this tax bill, and contemporaneously, guess what they announced? They announced that they were going to actually increase their dividend very substantially, and do stock buy-backs. Now, stock buy-backs are the opposite of investing in new productive things. You simply buy back shares so it increases the price of existing shares so top managers get a much more valuable bonus, and some of the benefit goes to shareholders as well.
And again, these are overwhelmingly the wealthiest Americans, so it is smart politics on the part of these companies, but it doesn’t change anything about the fact that overwhelmingly, as business leaders told Treasury Secretary Mnuchin, they are not going to use these jobs either to give more income to workers, hire more workers, or to make the kind of investments in research and development that can increase productivity, increase future growth of the economy, increase future wages of people in the economy. So, it’s good politics, bad economics.
AARON MATÉ: Right, and just to explain, for anybody who isn’t familiar with the term, a dividend is what a company pays to its shareholders. Now, in terms of sharing the benefits, one thing I found interesting here, Bill, is that … so this corporate tax rate now is going down to 21%, and that’s permanent. But yet, with these bonuses from say ATT and Comcast of a thousand dollars to their employees, those aren’t recurring bonuses. They’re a one-time bonus of one thousand dollars. So, the employees get one thousand dollars once. These companies get a massive cut to 21% for life.
BILL BLACK: Yeah, it’s actually of course worse than that. You’re quite right in what you’ve said, except that two things have to be kept in mind. One, these companies were going to do it anyway. They were going to raise wages for this small segment, for example, in Wells Fargo’s case, because they had operational needs to do that anyway. So this has nothing to do with the Trump tax cut. It is pure theater. And second, not only are the corporate tax cuts permanent, but they have, in our last talk as I said, and again it didn’t take any great genius, if the logic is tax competition, the United States needs to cut its corporate tax rate to compete with Ireland and such, well what are Ireland and other nations going to do that are in competition with us if we slash our corporate tax rate?
They’re going to cut they’re corporate tax rate as well, and there are a number of countries already beginning that process. And then the logic is going to be, we need to make further cuts in our corporate tax rate, and of course this “logic,” which should go in quotations marks, inexorably leads you to have zero corporate tax rate, which is what their real goal is. And by the way, they are open behind the scenes in terms of conservative economists that that’s exactly what they want to produce.
AARON MATÉ: We’ll leave it there. Bill Black, professor of economics and law at the University of Missouri, Kansas City. Thank you.
BILL BLACK: Thank you.
AARON MATÉ: And thank you for joining us on The Real News.