Only 13 Percent of Business Tax Savings Are Expected to Reach Workers

Remember the Republican tax reform bill that was just signed into law? During his recent State of the Union address, President Trump was sure to remind us of this GOP victory — no doubt because the bill is one of the few tangible successes his administration has netted during its first year.

In his address, Trump boasted that the massive tax cuts would ultimately result in a $4,000 increase in income for the average American household. This claim is naive at best — and deliberately disingenuous at worse.

The GOP has long argued that these tax cuts would mean more money to line the pockets of middle class Americans, but the reality is shaping up to be rather different.

A new survey of Morgan Stanley analysts finds that massive tax cuts for companies will benefit investors, while barely boosting workers’ income. Overall, the survey finds, a mere 13 percent of these tax savings will make their way into employees’ wallets.

Instead, businesses will overwhelmingly spend their savings — 43 percent — on stock buybacks and dividends to investors. The rest will mainly be used to fund acquisitions and purchase new equipment, all the while leaving workers in the lurch.

That isn’t to say that nothing will trickle down to workers. The Trump administration, in a self-congratulatory press release, announced that so far 300 companies have declared their intent to pass on some of their tax savings to their workers, mainly in the form of one-time bonuses and moderate raises. While this might sound great on first pass, these benefits will only apply to 3.5 million Americans — out of the more than 125 million in the workforce.

Meanwhile, the total American household debt hit a record high of more than $13 trillion at the end of 2017. The trend has been ongoing for a half decade now, thanks primarily to auto, credit card, mortgage and student loan debts continuing to spiral out of control.

If there were ever a time that Americans needed a meaningful boost to their bank accounts, it would be now. And the GOP’s tax cuts are coming up significantly short in this regard.

The mantra of fiscal conservatives is that the more money employers are allowed to keep, the more workers will be ultimately be compensated and more jobs that can be created — trickle down economics in a nutshell. On paper, it seems like a rather straightforward and logical philosophy. In practice, however, these are rarely the results that come from tax cuts and refunds.

In this corporate age, the reality repeatedly demonstrated is that employers, when left to their own devices, frequently opt to prioritize profits and appeasing investors over fairly compensating their workers — the individuals without whom business would not be able to operate.

As I wrote last year, the major players in the Republican Party today — Donald Trump and Paul Ryan, in particular — are adherents to the philosophy of Ayn Rand. The cornerstone of this school of thought is the notion that there have been — and always will be — winners and losers. Those who are wealthy have earned their station wholly through merit; to tax them or otherwise impede on their ability to horde wealth or to ask them to share their profits with society is the worst evil.

Clearly, the GOP tax cuts were designed with this philosophy in mind and little else. It was never about helping those outside of the American upper classes; quite the opposite. No one should be surprised that this is how the tax bill’s implementation will play out.

Photo Credit: Becker1999/Flickr

57 comments

Marie W
Marie W9 months ago

thanks for sharing

SEND
Julie W
Julie Wabout a year ago

Yea, the so-called 'trickle down effect' is a myth. Always was, always will be.

SEND
Dan Blossfeld
Dan Blossfeldabout a year ago

So if 13% goes to the workers, and 43% goes to the company, does that mean the remaining 44% goes to the consumers in the form of lower prices?

SEND
Paulo R
Paulo Reesonabout a year ago

ty

SEND
Paulo R
Paulo Reesonabout a year ago

ty

SEND
Clare O
Clare O'Bearaabout a year ago

Stop running a military budget that is in excess of the military spending of the next fifteen nations or so (it varies by the week) and remind yourselves that nobody actually wants to invade America.

SEND
Clare O
Clare O'Bearaabout a year ago

what did you expect? meanwhile America's national debt grows.

SEND
Adele E Zimmermann
Adele E Zimmermannabout a year ago

Trickle Down Economics does not work - never did. However, more money in the pockets of middle and low income Americans will go directly into the economy, spurring increased production of consumer products to satisfy increased demand, and filling the coffers of state and local governments to shore up our crumbling infrastructure. And, for those of you who resent economic safety net and supplemental food, housing and medical care programs, the demand on those will decrease. The only losers will be the people whose income was boosted by self-serving tax cuts. They will now have to earn their millions by steering their companies toward production rather than reinvestment. But that will make the stock market a whole lot less volatile than it has been - and was in 1929.

SEND
Brian F
Brian Fabout a year ago

Eric Austerity will not work. We need to raise taxes on the wealthy, cut the excessive military budget, and cut excessive corporate CEO pay which averages 300 times worker pay. The average corporate CEO should make no more rhan 10 times worker pay. Corporations are making recoed profits, and they need to share it with their workers.

SEND
Cathy B
Cathy Babout a year ago

Thank you for posting.

SEND