GOP Tax Cuts Are A $1 Trillion Windfall For U.S. Corporations

Screengrab/The Guardian/YouTube

Several companies announced worker-related bonuses or investments post tax bill, but some see this as a political ploy.

The “Tax Cuts and Jobs Act” that passed through both chambers of Congress and received the signature of President Donald Trump on December 22 cut corporate taxes enough to save companies an estimated $1 trillion over the next ten years.

There has been some debate over the way companies will spend their tax savings, but surveys and history suggest it will benefit workers far less than the Trump administration - and now numerous companies - are suggesting.

"Just 14% of CEOs surveyed by Yale University said their companies plan to make large, immediate capital investments in the United States if the tax overhaul passes."

"If tax reform is passed and the overseas cash gets taxed at a much lower rate, 65 percent of companies say they would pay down debt, according to the 2017 Bank of America Merrill Lynch corporate risk management survey.

After paying down debt, the next most likely use at 46 percent is share repurchases, followed by mergers and acquisitions, and only then capital expenditures."

"Nearly all have vocally supported the GOP bill. Many say at least some of the extra money would probably go to shareholders via higher dividends. Other popular plans for additional cash include: looking for other companies to buy and paying down debt. Only two — AT&T and CVS — have made explicit promises to hire workers."

Several companies came forward as the bill was passing to announce worker-centered benefits they will pursue, selling the shift as a direct result of corporate tax relief:

In carefully crafted announcements released within minutes of Trump’s White House press conference, banks and telecoms announced commitments of more than $2 billion in bonuses, donations, and investments (this calculation doesn’t account for wage hikes, which were impossible to quantify given the information available). In press releases and on Twitter, the companies praised the tax bill for its salutary effects on workers’ wages.

But the announcements are seen by many as a political ploy to hide the windfall coming to companies and their shareholders in light of the lowered tax rate.

“Now, whenever an executive raises wages, they will make sure to thank tax ‘reform’ to try to take some heat off Congress, which has just given them a truly enormous Christmas gift,” [Kimberly] Clausing [of Reed College] wrote by email.

“I would be surprised if the changes were due to tax reform, given how quickly the changes were announced,” said William Gale, co-director of the Tax Policy Center, a joint venture between Brookings Institution and the Urban Institute. “But I certainly understand why the companies might want to say it was due to tax reform.”