Since Republicans in Congress passed their sweeping, mind-bogglingly regressive tax legislation in December, people have wondered whether companies will use their tax windfalls on capital investments—also known as “spending money on doing business things, instead of hoarding it”—and how much of this new money would reach the pockets of workers. Will this finally prove to the haters and losers, once and for all, that Trickle-Down Economics Works?
New data seem to suggest: nope!
In a report published Monday, Bloomberg’s Stephen Gandel found that companies are funneling the lion’s share of their tax breaks into their shareholders’ bank accounts, rather than spending their savings on worker compensation, business investments, or philanthropy.
Bloomberg found that fully 60 percent of companies’ tax breaks were going toward buying back shares of their own company—a practice that boosts companies’ stock prices, but does little to help people who aren’t already wealthy. After the tax bill passed in December, companies started buying back their shares in a frenzy. So far, companies have announced more than $178 billion in share buybacks.
American companies also appear to be saving the lion’s share of their tax breaks. Rather than spending their newfound savings on higher wages and better benefits for their workers, business investments, or philanthropy, companies are squirreling away their windfalls—maybe to save up for that West Elm patio set they’ve been eyeing.
Take Comcast for example. The telecom giant is projected to save $1.8 billion in corporate taxes because of the new law. The company is using those savings, in part, to funnel $600 million toward share buybacks, compared to $170 million for employee compensation, and $0 for philanthropy.
The idea that companies are finally able to invest in their employees because of the tax bill is, well, bullshit. As Gandel writes (emphasis mine):
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.
Companies like Comcast are waving moldy carrots in front of their workers’ faces, and releasing press releases about how amazing the carrots are, while stuffing $100s in their back pockets. Sadly, this campaign to bamboozle non-wealthy Americans into believing massive corporate tax cuts help them appears to be working.
It’s worth remembering that just 52 percent of Americans own stocks either directly or through 401(k)s and other mutual funds. The other 48 percent of Americans are completely left out of the buyback bonanza. Even in the stock-owning classes, things are predictably unequal: The wealthiest 10 percent of Americans own, depending on whom you ask, somewhere between 80 percent and 93 percent of stocks. The longterm winners and losers of this tax bill are clear.
When Republicans wish to sell the people on massive corporate tax cuts or similar giveaways to their donor classes, they package them as “stimulus.” But America’s problem has not been a lack of capital to invest in workers; the problem has always been a lack of will to invest in workers—and workers’ lack of power to demand a larger share of capital. Companies like Apple, Comcast, and Amazon don’t pay their warehouse workers and customer service representatives starvation wages because they simply can’t afford to pay them better. They do so because under the current law and in this political environment, they can get away with it.
The companies benefitting the most from GOP tax cuts didn’t lack capital to invest in their workers. They lack anyone forcing them to give a shit about the people creating their prosperity.