Half a Year Into The GOP Tax Cuts, Are We Seeing Benefits?
The inequity of tax cuts for corporations versus the working class was one of the most contentious points of debate surrounding the GOP tax bill. The corporate tax rate fell from 35 percent to 21 and it was said the windfall of cash for corporations would yield wage and job increases. We saw a few companies hand out thousand dollar bonuses but data has not shown more since then. As for jobs, the data doesn’t point to any significant growth that would indicate the tax cuts had any major impact. The Labor Department actually showed in June jobs fell and unemployment rose.
At least for now, it has become clear that these companies threw their employees a one-time bone rather than an actual wage increase. The bone wasn’t nearly big enough nor was it going to be a reoccurring thing. If these same companies were to have increased wages by fifty-cents you would have attained that same one-time bonus and then some as time went on. But instead, these companies opted to run what appears to be a public relations campaign in the form of these bonuses.
As time passes we’re gaining more insight into how businesses are investing their extra cash and we’ve seen a huge portion of those funds go to stock buy backs. Not only did the most affluent entities, both corporations and individuals, see the greatest decrease on their tax bill, they were also the beneficiaries of how the economy reacted as a result of the tax cuts in the form of stock buy backs.
It really shouldn’t surprise anyone corporations opted for stock buy backs versus wage increases. There were dozens of reports from economists and executives themselves stating that the tax cuts would likely lead to stock buy backs. After all, the economy was moving in the right direction since 2010, what was to be gained from increasing wages for these businesses? Profits and productivity have continued to grow amid claims that the current tax code was holding the economy back. The part of the economy that that hasn’t grown despite this growth since the seventies is wages; In fact, they’ve fallen over that same period of time.
The only indication that employees saw a benefit from the tax cuts in real dollars were those one-time bonus, a drop in the buck compared to could have been made over a ten year period with a dollar increase in wages. But the reality is even after the tax cuts, which were touted to have increased wages, has appeared to have done just the opposite.
According to data from the Bureau of Labor Statistics (BLS) and private data for the 2nd quarter, which has not been released from the BLS yet, real wages are actually falling. There is still time to see just how the tax cuts pan out, but there has been growing concern why stock buy backs took precedence over real wage increases or capital investments. It’s also a wonder as to how long we need periods of low unemployment to see wage increases.
Due to the small decrease in taxes, falling wages, and the rising premiums in health care—due to the repeal of the individual mandate, also a part of the tax bill—It is no surprise that Americans are not sure that they’ve seen much of any benefit from the GOP’s tax cuts.
The question we’re all asking, or should be asking, regardless of your politics is what does it takes for wages for everyday Americans to increase. Why is it that despite record profits, stock market highs (a poor indication of the economy), massive tax cuts, and increasing productivity not yielded wage increases for employees? What will it take to close the massive gap of inequality where 1% of Americans hold 90% of the wealth or are we okay with it? Or is there a way of sharing the massive profits through wage increases and potentially stimulating the economy through an increase in spending?
It’s been a half a year since the tax cuts and I am sure many will continue to see how the economy changes or lack thereof at least for now, things aren’t trending in the right direction.