#GOPTaxScam Delivers Billions To Corporate Executives And Wealthy Shareholders While Middle-Class Workers Are Left Behind
CNN Money: “One Of Wall Street's Favorite Tools Could Be Deepening The Growing Chasm Between America's Rich And Poor.”
Houston Chronicle: “Little Evidence That The Corporate Tax Benefits Are Finding Their Way To Employees.”
Economist At Mizuho Securities: “You’re Not Going To Get The Macro-Economic Benefit The Administration Thought It Was Going To Get From Its Tax Cuts. It’s Going To Go To The Areas That Don’t Stimulate Growth.”
Financial Times: Trump Tax Cuts Herald $1tn Bonanza For US Investors. “US companies are on track this year to return a record $1tn to shareholders, as Donald Trump’s tax cuts prompt boards to boost buybacks and dividends at a faster rate than their capital expenditure, research and development budgets or wage bills.” [Financial Times, 3/4/18]
Houston Chronicle: Oil Companies To Reap Windfall In Tax Cuts, But Shareholders Get The Lion’s Share. “Houston energy companies have reported at least $20 billion in tax benefits from the recently enacted tax overhaul, but whatever savings the firms realize will likely go to well-heeled investors rather than support the local economy through hiring, pay raises and expansions. Since the Republican-controlled Congress slashed corporate rates from 35 to 21 percent at the end of last year, local energy companies have authorized billions of dollars in share buybacks and increases in quarterly dividends, joining scores of other American corporations in giving investors a bigger chunk of their profits. Economists said the trend could undercut the Trump administration’s assertion that tax cuts will directly grow employment, wages and economic activity. In fact, the two biggest energy companies based in Houston, ConocoPhillips and Phillips 66, said the corporate tax cuts have had no effect on employee wages, bonuses or investment plans. ‘What we know is that this bill increased corporate profits,’ said Ryan Alexander, president of nonpartisan watchdog group Taxpayers for Common Sense in Washington. ‘A disproportionate benefit goes to the investor class. It was a predictable result, but it was not how it was sold.’ … There’s still little evidence that the corporate tax benefits are finding their way to employees.” [Houston Chronicle, 3/2/18]
Huffington Post: New Tax Law Benefiting Shareholders More Than Workers So Far. “Since President Donald Trump signed the Republican tax bill in December, hundreds of retail companies have announced employee bonuses totaling more than $3 billion, which Republicans have said proves them right that the new law benefits regular Americans. But so far, companies have thrown a lot more money at their shareholders than at their workers. According to several estimates, firms have announced roughly $200 billion worth of stock buybacks this year, inflating the value of company shares by reducing their supply. ‘Stock buybacks are windfalls that drive up the value of investment portfolios for CEOs and high-flyers,’ Sen. Ron Wyden (D-Ore.) said in a Senate floor speech this week. ‘And they’re coming in at a rate 30 times greater than worker bonuses — 30 to one! They’re on pace to double the amount from the first quarter of last year.’” [Huffington Post, 3/2/18]
Fast Company: Workers Are Getting Basically Nothing From The Corporate Tax Windfall. “Following last December’s corporate tax cuts, dozens of companies from AT&T to Walmart have announced bonuses and pay rises for their employees. But how much of the windfall is actually ending up in the hands of workers? The answer is less than you might think, according to an analysis of the first 105 announcements. Just Capital, which tracks corporate performance on a range of corporate responsibility-type metrics, finds that just 6% of capital allotted so far is going to staff, while 58% is going to shareholders in the form of dividends, share buy-backs, or retained earnings.” [Fast Company, 3/2/18]
CNN Money: Are Stock Buybacks Deepening America's Inequality? “One of Wall Street's favorite tools could be deepening the growing chasm between America's rich and poor. Since 2008, companies in the United States have spent a stunning $5.1 trillion to buy back their own stock, according to Birinyi Associates. Shareholders love buybacks, because they boost stock prices by making shares scarcer. Buybacks have exploded in 2018 thanks to windfall from the Republican tax law. American companies including Wells Fargo (WFC) and Cisco (CSCO) have showered Wall Street with $214 billion of stock buyback announcements so far this year, according to research firm TrimTabs. But critics argue Corporate America's fascination with stock buybacks has come at a real cost to American workers. Instead of focusing on short-term rewards for shareholders, they say companies should make long-term investments by retraining workers, ramping up benefits and boosting wages. ‘Stock buybacks have been a prime mode of both concentrating income among the richest households and eroding middle-class employment opportunities,’ said William Lazonick, a professor at the University of Massachusetts Lowell who has studied the impact of stock buybacks.” [CNN Money, 3/5/18]
Bloomberg: New Grist in Tax-Cut Debate Is $800 Billion Buyback Estimate. “Flush with cash from President Donald Trump’s tax overhaul and bathing in more earnings than they know what to do with, U.S. companies are embarking on a buyback binge of historic dimension. How big will it be? JPMorgan Chase & Co. strategists led by Dubravko Lakos-Bujas estimate that gross share repurchases will reach a record of around $800 billion this year, up from $530 billion in 2017. Just under half is attributable to improving profit growth, lower corporate levies and the repatriation of overseas cash under Trump’s program.” [Bloomberg, 3/2/18]
Axios: Tax Cuts Will Save Health Care Companies Billions — But Not Patients. “Health care companies will add tens of billions of dollars to their bottom lines this year thanks to savings from the Republican tax cut package. But only a fraction of that money will benefit patients. Why it matters: Even though a lower corporate tax rate frees up more cash for a health care system that more patients are finding increasingly unaffordable, patients should not expect the health industry's windfall to lead to lower premiums, reduced prices or major industry changes. … Most of the money is going toward share buybacks, dividends, acquisitions and paying down debt — with just a sliver for one-time employee bonuses, research and internal investments.” [Axios, 3/5/18]
Bloomberg (Gandel): “There has been plenty of exaggeration and public relations spin in the tax announcements. Comcast Corp., for instance, said it would spend $50 billion over the next five years, which the company contends will create thousands of jobs, all thanks to the tax bill. Not so fast. That's roughly how much Comcast has spent on capital expenditures in the past, long before the tax gains rolled in. Overall, companies have announced plans for just less than 80 percent of their tax savings. Add those retained earnings, which also boost the value of companies' shares, to increases in buybacks and dividends, and roughly 60 percent of the gains from the tax bill are going to shareholders, compared with 15 percent for employees.” [Bloomberg, 3/5/18]
ECONOMISTS: “BUYBACKS ARE NOT RESULTING IN JOBS OR NEW FACTORIES. THEY ARE NOT BENEFITING THE MIDDLE CLASS.”
Steve Ricchiuto, Chief U.S. Economist At Mizuho Securities: “You’re not going to get the macro-economic benefit the administration thought it was going to get from its tax cuts. It’s going to go to the areas that don’t stimulate growth.” … “Share buybacks are what they are. They give the shareholders an opportunity to get the capital back and erase the value of those who don’t.” [Bloomberg, 3/2/18]
Christopher Cole, Managing Partner at Artemis Capital Management: “Buybacks are not resulting in jobs or new factories. They are not benefiting the middle class.” [CNN Money, 3/5/18]
William Lazonick, Professor of Economics at UMass Lowell: “Stock buybacks have been a prime mode of both concentrating income among the richest households and eroding middle-class employment opportunities.” [CNN Money, 3/5/18]
William Lazonick, Professor of Economics at UMass Lowell: ?People who are in the business of buying and selling shares are the ones who benefit from buybacks.” [Huffington Post, 3/2/18]
Robert Reich, Former Secretary of Labor: “Buybacks have a negative impact on inequality and on the economy.” [CNN Money, 3/5/18]
Robert Shiller, Professor of Economics at Yale University: Buybacks are “smoke and mirrors.” [CNN Money, 3/5/18]
Edward Wolff, Economics Professor at NYU: “The gains go disproportionately to the top,” Wolff said in an interview. Stock buybacks “will just exacerbate existing wealth inequality,” he said. [CNN Money, 3/5/18]
Dr. Komal Sri-Kumar, President of Sri-Kumar Global Strategies: “Share buybacks are going to be positive for equity prices but they are not going to do anything for you to get a job or for your wages to go up.” [Business Insider, 2/28/18]
