While Prime Minister Malcolm Trumpbull is marching around Washington talking to American CEOs about company tax cuts, and the Coalition and the business lobby continues to argue that cutting company taxes will trickle-down to workers via increased investment and higher wages, the truth of the impacts have been revealed. From MarketWatch:
Buyback announcements are up 22%, but capex plans are up just 3%…
Wherever Donald Trump’s tax cut was going, not much of it was going to ordinary families, and that not for long, since the individual-tax-cut part of the law expires at the end of 2025, in order to keep its handouts to corporations and small-business owners from shooting the federal deficit to Uranus rather than just to Mars…
But now, courtesy of Goldman Sachs, we know where the tax cut is really going. Surprise! It’s paying for stock repurchases by corporations, as Corporate America despairs of investing in much other than dividing the pie provided by near-record profitability into fewer and larger pieces.
Buyback announcements are up 22% this year to $67 billion in just six weeks, Goldman said in a note to clients. This follows a report by benefits consulting firm Aon Hewitt finding that 83% of large companies don’t expect the tax cut to boost salaries at all — just help pay for small bonuses companies like WalMart WMT, +0.13% and AT&T T, +0.69% gave workers, which reporters soon discovered were, themselves, skewed toward higher-paid, longer-tenured employees in many cases.
And it comes as Goldman finds companies have raised guidance on re-investment in their businesses — the putative reason for cutting corporate taxes at all — only 3%.
…the deficit will go to 5%, which all but assures the debt gets bigger, somewhat harder to manage, and probably leads to a drop in national income in the future, according to Jason Furman, President Barack Obama’s chief economist.
None of this should be a surprise. In January, Moody’s credit rating agency said that it did “not expect [US] corporate tax cuts to lead to a meaningful boost in business investment”.
It’s trickle-down nonsense to believe that cutting company taxes will benefit ordinary workers. Instead, they’ll be left paying off an even bigger Budget deficit.
