Tag Archives: tax bill

‘Job Creators’ and the Tax Bill

According to the Republicans pushing for its passage, the recent, massive overhaul of the tax code was a “middle-class” tax cut. Yes, they admitted that it bestowed largesse on the wealthy, and yes, they recognized that the benefits to corporate taxpayers dwarfed the pennies that the poor and middle-class will realize, but that, they assured us, was because the GOP is all about job creation. Give corporations tax “relief” (not that most of them had been paying at the going rate) and they would use those dollars to create jobs.

Right.

Opponents of the tax bill publicly doubted that corporate savings would be used to create jobs, or to raise pay levels. They predicted that the money would be used instead to buy back stock and “reward” management with bonuses. And they pointed out that the meager tax relief granted to the middle class will phase out, while the corporate cuts are permanent.

Once the bill passed–and the Koch Brothers had donated $500,000 to Paul Ryan (a contribution I’m sure was merely coincidental, despite coming a mere two weeks after the measure was approved)–there was an initial flurry of publicity suggesting that ordinary workers at several large companies had been given bonuses. (It later turned out that those payments went to far fewer workers than the original publicity had suggested.)

Now, it turns out that the cynics were right all along. I know–you’re shocked.

After President Trump signed the Republican tax cut into law, companies put out cheery announcements that they were giving workers bonuses because of their expected windfalls from the tax reductions. The president and Republican lawmakers quickly held up these news releases as vindication for their argument that cutting the top federal corporate tax rate to 21 percent, from 35 percent, would boost workers’ incomes even as it added $1.5 trillion to the debt that future generations would have to pay off.

Now corporate announcements and analyst reports confirm what honest observers always said — this claim is pure fantasy. As executives tell investors what they intend to do with their tax savings and their spending plans are tabulated into neat charts and graphs, the reports jibe with what most experts said would happen: Companies are rewarding their stockholders.

Businesses are buying back shares, which creates demand for the stocks, boosts share prices and benefits investors. Some of the cash is going to increase dividends. And a chunk will go to acquiring other businesses, creating larger corporations that face less competition.

It isn’t just liberal pundits making these claims. Morgan Stanley analysts have estimated that 43 percent of the savings realized by corporations will be used for buybacks and dividends and another 19 percent will fund mergers and acquisitions. They calculate that  17 percent will go into capital investments, and a mere 13 percent will be used for bonuses and raises. CNBC reports that stock buy-backs are at a record pace.  Axios  has reported that nine pharmaceutical companies have announced $50 billion in buybacks since the tax law was passed.

The open question is whether voters whose paychecks are marginally fatter under the new withholding tables will believe they were the beneficiaries of this “reform,” and whether that belief will influence their votes in November.

As Lincoln said, you can fool some of the people some of the time….

Bread and Circuses

“Bread and circuses” used to be a fairly common reference to the Roman government’s practice of distracting the masses by providing food (bread) and circuses (contests between lions and Christians, etc.) in order to keep them occupied. The term–used far less frequently these days– is a reference to superficial perks used to appease popular passions, a tactic to generate public approval through diversion and distraction.

I’ve been thinking about that tactic in connection with the GOP’s “middle class tax cut.” (I love GOP titles–remember George W. Bush’s “Clear Skies” moniker for a bill permitting more pollution? This time it’s a “middle class tax cut” for a measure that is anything but.) My specific question goes beyond the dishonesty of the bill’s title, however: I wonder whether the lower withholding requirements, which will initially allow workers to take home a somewhat larger portion of their paychecks, will be enough to distract Americans from the other, less pleasant and less immediate consequences of that bill.

Will it obscure the fact that tax “reform” will further enrich the already wealthy without stemming the job losses that are accelerating as companies increasingly automate, and as retailing faces enormous challenges? After all, this tax “reform” was hyped as a (trickle-down) measure that would incentivize those “job creators” to do their thing–to create jobs and raise the pay of their workers.

How’s that working out so far?

Harley-Davidson just closed a plant in Kansas City, laying off 800 workers. Managers blamed both a provision of the tax bill and Trump’s decision to pull out of the Trans-Pacific Partnership.

Passage of the tax bill didn’t affect or delay the decision of Toys-R-Us to close 180 stores–nor the closing of 63 Sears locations. Kmart has closed 45 stores; Macy’s has closed 68. Walmart made a big deal out of its response to passage of the tax bill, announcing $1000 bonuses (the company made less noise about the fact that only employees who’d been with the company for 20 years would actually get a thousand dollars), and immediately followed up that PR blitz by closing 63 of its Sam’s Club stores and throwing thousands of people out of work. (Given Walmart’s turnover rate, I’d guess there weren’t a lot of 20-year veterans getting the full bonus amount, either.)

Industry publications are filled with layoff announcements: Pfizer announced it will eliminate 300 research jobs in New England; another 4,000 are expected to lose their jobs with AT&T. Kimberly-Clark is using its tax windfall to reward shareholders, while laying off between 5,000 and 5,500 workers. Comcast said the $1,000 bonus it splashed across the news would serve as severance for 500 terminated employees. Microsoft, Coca-Cola and a host of lesser-known brands have also fired hundreds of workers.

The tax cut didn’t change any of these decisions, and other policies of the Trump Administration are only accelerating the job losses.

Those of us in Indiana know that Carrier has now completed its move to Mexico, despite Trump’s much-hyped “intervention.”

Meanwhile, the President’s love affair with coal led him to impose stiff tariffs on solar panels–a move that will not only depress sales and increase prices for environmentally-conscious consumers, but will cost a predicted 23,000 workers their jobs. Meanwhile, although coal is not coming back, the tariffs will slow the replacement of fossil fuels with clean energy–further enriching the Koch brothers, who demonstrated their gratitude to Paul Ryan for passage of tax “reform” by giving him $500,000 a mere two weeks after the bill was signed. (Estimates are it will save them a cool billion a year, so they could afford a paltry half-million to their House puppet. Quid Pro Quo much?)

American workers aren’t even getting bread and circuses–unless you count the circus that is Washington, D.C. And that one isn’t entertaining; it’s terrifying.

Talk About Cutting The Safety Net….

When you elect people who have very limited knowledge of government or the legal system, you get a lot of unanticipated and unfortunate consequences.

Trump is hardly the only self-proclaimed “genius” who is actually clueless; in fact, voters need to recognize that the real villain of this surreal moment we’re experiencing isn’t Trump–who is arguably too far out of it to even know what he’s doing–but the current in-over-their-heads gang of Congressional Republicans who are protecting and enabling him.

A recent, glaring example is in the combined impact of their much-touted tax “reform” bill and their proposals to dramatically cut America’s social safety net.

Republicans love to talk about the negative consequences of social welfare programs–the purported encouragement of “dependency,” the “unfairness” of taxing working folks to support laggards who are sitting at home eating bon-bons (and while they rarely say it out loud, there is usually a “wink wink” suggesting  that those laggards are disproportionately black or brown). Data and evidence–things foreign to their comprehension–dispel all of this, of course. For example, most adult food stamp recipients work full time, as do most non-disabled adults on Medicaid. There is absolutely no research supporting accusations that receipt of welfare produces dependency, and most people on welfare are white.

Even more irritating is Republicans’ repeated insistence that, if government would just get out of the way, poor people’s needs could be met by private and/or nonprofit charities, especially religious charities. When George W. Bush called on the “armies of compassion” to replace much of the welfare system as part of his “Faith-Based Initiative,” researchers (I was among them) pointed out that private charities didn’t have the resources to even come close to his goals–and most churches were barely keeping the pastor paid and the roof fixed.

As we’ve seen, facts are pretty irrelevant to this crew. Nevertheless, given their constant lip-service to American generosity and private-sector charity, you wouldn’t expect them to pass a tax bill that threatens to cripple those same efforts. After all, they are now proposing massive cuts to Social Security, Medicare and Medicaid–cuts they evidently assume will be made up by funds from the charities their tax bill is eviscerating, if they think about it at all.

Patrick Rooney is an economist at the Lilly School of Philanthropy at IUPUI, where I teach. (Full disclosure; I am adjunct faculty at the Lilly School.) I know  Patrick and his work, and he is a first-rate scholar. Here’s his analysis of what the tax bill means for charitable giving:

The tax-code overhaul that Republican lawmakers approved and Trump signed into law will raise the price of charitable giving for millions of Americans, surely reducing how much money the nation gives.

As an economist and a scholar of philanthropy who researches how public policies shape charitable giving, I anticipate that the tax tweaks will lead Americans and U.S. companies to donate roughly US$21 billion less per year to charity.

The link will take you to the article detailing the impact of the tax bill’s various provisions on incentives for charitable giving, and those details are instructive. But the real “take away” is the utter failure of Congressional Republicans either to connect the dots– or worse, to care about the harm they are doing to millions of Americans (most of whom are elderly or children) in order to further enrich their donors.

Those who aren’t “geniuses” like our President–aka mental midgets–are something even worse. They’re moral midgets.

 

 

I Wonder Why We Have These Agencies and Programs?

Or, more accurately, why we had them.

A few days ago, The Hill came out with a list of 66 agencies that the tax “reform” bill simply eliminates. They include everything from Agriculture’s Economic Development agencies to the Commerce Department’s National Oceanic and Atmospheric Administration Grants and Education to the Education Department’s Grants for Comprehensive Literacy Development  and Effective Instruction.

At a time when our infrastructure is crumbling around us, the bill eliminates the Transportation Department’s National Infrastructure Investments (TIGER).

The list includes many other programs that would seem important, as well as a number of initiatives with puzzling names and obscure purposes.

I would be the last person to argue against pruning the mystifying thicket of federal programs and agencies. I’m sure many of them have outlived whatever usefulness they may have once had–and it wouldn’t shock me to discover that some of them didn’t ever have much justification for their existence. That said, the process through which they are being terminated is simply indefensible.

There has not been a single hearing held to determine the continued utility of any of these agencies. To the best of my knowledge, no notices were sent out to affected constituencies, no publication in the Federal Register invited public comment. Like the rest of this monstrous bill, these decisions were made hastily, in back rooms to which neither Democrats nor more moderate Republicans were invited.

This is not the way a democratic system works. In a representative government that honors due process and the rule of law, how decisions are made is ultimately more important than the substance of the decisions themselves.

The decision to terminate a program or agency should be made in daylight, with people familiar with the purposes and operation; those making the determination should hear from critics and defenders of the program, and from proponents and opponents of its termination. There should be some version of a cost/benefit analysis upon which a final decision is made.

These 66 programs were created for a reason. There should be a principled reason for their discontinuance.

Right now, America is being ruled–not governed, but ruled–by an illegitimate cabal empowered by vote suppression and gerrymandering and answerable not to the citizens who (theoretically) elected them, but to their donors and to a much lesser extent, their rabid and uneducated base.

 

Shamelessness And The Tax Bill

Jennifer Rubin is a conservative columnist. Like many of the pundits on the political Right–and unlike most GOP members of Congress– she is intellectually honest. (Here in Indiana, Paul Ogden falls into that category; I often disagree with his conclusions, but I have a high degree of respect for his intellectual integrity.)

Rubin doesn’t mince words about the GOP’s single legislative “accomplishment.”

Republicans will knock a giant hole in the budget with a tax cut of $1.5 trillion, most of which goes to the rich and corporations. Rather than acknowledge their hypocrisy on the debt, they choose to misrepresent the facts.

She then provides a couple of examples, one an exchange between George Stephanopolous and  Mitch McConnell, and one between Senator Susan Collins–ostensibly the Senate’s only GOP moderate–and Chuck Todd on Meet the Press. Forgive the length of this quote, but I think it is important not to summarize or characterize.

CHUCK TODD: Alright, if the debt is unsustainable at $14 trillion, how do you, how did you make yourself comfortable voting for something that’s going to increase the deficit? This tax bill we’re at 20.6 trillion now and the best estimates saying it’s going to even the best estimates of dynamic scoring that we could still find still add half a trillion dollars to the deficit.

SEN. SUSAN COLLINS: Economic growth produces more revenue and that will help to offset this tax cut and actually lower the debt.

CHUCK TODD: Where’s the evidence? Where, explain to me. Find a, find a study that actually says what you’re claiming.

SEN. SUSAN COLLINS: Let me–

CHUCK TODD: It doesn’t exist.

SEN. SUSAN COLLINS: Let me do that. First of all if you take the C.B.O.’s formula and apply it four to four tenths of one percent increase in the GDP generates revenues of a trillion dollars, a trillion dollars. Even the joint committee on taxation has projected that the tax bill would stimulate the economy to produce hundreds of billions of additional revenue. I’ve talked four economists, including the Dean of the Columbia School of Business and former chairs of the councils of economic advisors and they believe that it will have this impact. So I think if we can stimulate the economy, create more jobs that that does generate more revenue.

CHUCK TODD: But why isn’t there a single study? I’m going to show you three studies that we have, sort of a liberal one, a centrist one, and a conservative one right up there. The most conservative one, the most pro-economic growth argument, still adds $516 billion to the deficit over ten years.

SEN. SUSAN COLLINS: Well, talk to economists like Glenn Hubbard and Larry Lindsey and Douglas Holtz-Eakin, who used to be head of the C.B.O. And they will tell you otherwise. So I think you will find that economists just don’t agree on this.

Jennifer Rubin then did what credible reporters do; she contacted the quoted economists, who told her that they had not made the statements Collins attributed to them. Both Hubbard and Holtz-Eakin said they’d told Collins that the measures would “offset but not eliminate the static budget loss.”

After confirming that even conservative Republican economists deny that the tax cuts will come close to paying for themselves, Rubin writes

This raises the question as to whether Collins and McConnell misunderstand the advice they get, choose to cherry-pick what they are given or simply don’t want to fess up that they’ve abandoned fiscal sanity in search of a political win and to soothe donors. The most generous interpretation is that they are operating with unsupportable optimism that these cuts will do something no other tax cuts have ever done– pay for themselves.

They didn’t “misunderstand.” They’re shameless and they’re lying. As Talking Points Memo reports, economists and former government officials all predict the bill will drive up the federal deficit, shrink and destabilize the health care market, make our already historic income inequality worse, and–worst of all–give Congress cover to do what Paul Ryan and his ilk have long wanted to do:  make deep cuts to the social safety net and government programs.

I’ve said it before: I don’t know how these people sleep at night.