On the campaign trail, President
Donald Trump linked a reduction in
the corporate tax rate to the well-being of American workers. Yet early
evidence suggests that shareholders
are the big winners from the Tax
Cuts and Jobs Act so far.
This proof comes, ironically,
from the dozens of companies that
have recently announced one-time bonuses and wage boosts. In
some cases, they have attributed
this generosity to the new law,
which Trump signed in December.
Walmart, for one, announced that
it would boost its minimum wage
to $11 an hour. But this bump likely
represents just one-sixth of the annual tax savings the company will
enjoy going forward.
The average American worker’s
share of the corporate cuts is even
smaller. For every employer like
Walmart that has shown a commitment to permanently increasing
pay, others have promised to use the
savings to fnance one-time bonuses
or to fund stock buybacks or even
Stock market research frm Bir-inyi Associates estimates that S&P
500 corporations early this year
had announced $5.6 billion of wage
boosts and bonuses—and a whopping $171 billion of stock buybacks.
So, while some benefts of a cor-
porate tax cut will trickle down to
support. When Walmart boosted
its minimum wage to $10 in 2016,
the move was widely attributed to a
tight labor market and the retail-
er’s need to keep pace with Target’s
starting wages. The story is very
similar now: Last fall, with the
unemployment rate edging lower,
Target hiked its minimum pay for
workers above Walmart’s.
So why should Walmart’s latest
wage increase be viewed as the
result of anything but a response
to a competitive labor market? For
that matter, why wouldn’t the furry
of bonus announcements at the end
of last year be recognized mainly
as something hundreds of Fortune
500 corporations do every holiday
The stagnation of middle-class
wages is a long-standing problem.
that are designed to
bolster family income
in a meaningful way,
corporate tax breaks
that will have only an
Matthew Gardner is
a senior fellow at the
Institute on Taxation
and Economic Policy
in Washington, D.C.
workers in the form of higher wages,
Numerous analysts agree that
businesses are unlikely to change
their long-term strategic plans based
on new tax rates under the 2017 act.
American companies have enjoyed a
multiyear boom in profts. Many were
fush with enough cash to make new
capital investments long before the
corporate tax cuts were enacted.
In addition, low interest rates
meant that even cash-poor companies could easily bankroll new
investments. All of this suggests that
the leaders of Fortune 500 corporations aren’t likely to increase investment or revamp their hiring plans in
the wake of their new windfall.
This hasn’t stopped companies
from beating the public relations
drum to highlight their eforts to
reward their employees. And to be
sure, an estimated
$5.6 billion of wage
bumps, taken on its
own, could be seen
as a victory for the
Trump administration—but only if
these increases are
truly due to the 2017
corporate tax cuts.
In less political
times, that would
be a hard claim to
Trickle-down tax breaks
will have little effect.