It was a promise that couldn’t have been clearer: when President Trump sold his tax scam to Congress and the American people, he said the average family would see a $4,000 pay raise from their employers. “I would expect to see an immediate jump in wage growth,” added Kevin Hassett, head of Trump’s Council of Economic Advisors.
That was last October. The tax bill passed in December, and it’s now Labor Day, a good time to review how if at all the Trump-GOP tax scam is actually serving working people.
For most of them there’s a simple answer: it’s not. They’re still waiting for that $4,000 pay raise they were promised. Trump admitted as much (unknowingly perhaps) when he boasted during a speech marking the six-month anniversary of the tax cuts that “more than 6 million workers have received bonuses, pay raises, and retirement account contributions” because of the new law.
But do the math. Six million workers are barely 4% of the overall U.S. workforce of 155 million. So how about the other 96%? Incredibly, when you add in the rising cost of gasoline, prescription drugs and other necessities, real wages for most Americans have declined from a year ago.
Meanwhile, the wealthy and big corporations – let’s face it, the real intended beneficiaries of the tax cut law – aren’t waiting. They saw an immediate reduction in their taxes. For corporations, their tax rate was slashed from 35% to 21%.
Multinationals also got a $400 billion U.S. tax discount on their untaxed profits stashed offshore, and the chance to pay about half the domestic tax rate on future foreign earnings.
Many Republicans justified the huge tax cuts by saying they would spur economic activity and increase government tax revenues. President Trump’s top economic adviser, Gary Cohn, said that “we can pay for the entire tax cut through growth.” Sen. John Thune (R-S.D.) said that even “a modest amount of economic growth” could “cover the cost of this bill.” And White House budget director Mick Mulvaney went so far as to say the tax cut “actually generate[s] money.”
So what really happened?
Corporate tax receipts to the U.S. Treasury have plummeted—by over 40%, from $264 billion last year to $149 billion this year. Meanwhile, corporate profits have soared – up over 8%, reaching nearly $2 trillion in this year’s first quarter alone.
And what have corporations done with this windfall? Instead of spending on pay raises for their workers, they bought back their own stock. A lot of it. More than $700 billion worth of stock buybacks have been announced since the Trump-GOP tax law was enacted. That’s 100 times more than the $7 billion workers got in bonuses and raises.
Stock buybacks are a Wall Street maneuver that artificially raise the price of a company’s shares. Who benefits? Mostly CEOs, who receive a lot of their compensation in the form of stock, and other wealthy, well-connected shareholders, not rank-and-file workers.
The tax cuts have also added almost $2 trillion to the deficit. Now Republicans are trying to cover the hole they created by cutting critical public services that are important to working families.
Trump wants to cut Medicare and Medicaid— even though he promised during the campaign he wouldn’t touch them – as well as the Affordable Care Act (ACA). His cuts total $1.3 trillion over 10 years. Upping the ante, Congressional Republicans want to cut $2 trillion from these services. If adopted, this will mean millions of Americans will lose their insurance coverage. Premiums will soar for millions more, the age of Medicare eligibility will go up and prescription drugs will be even costlier.
Stagnant wages, rising costs, a ballooning deficit, cuts to healthcare and other vital services. Sadly, American workers won’t find much to cheer about this Labor Day in the much-ballyhooed tax cut law. But if a new Congress repeals the tax cuts for the wealthy and corporations and invests the money to make healthcare more affordable, provide free tuition to public colleges and rebuild infrastructure, then next Labor Day workers may really have something to celebrate.
Frank Clemente is executive director of Americans of Tax Fairness.