Some firms are crediting tax reform while handing out small bonuses, while others use the windfall to kill jobs or pay off shareholders. Are we winning yet?
He was going to Make America Great Again, he said. The anxious middle class, afraid of joining the ranks of the even-worse-off, believed him. They believed he felt their pain, well, about as deeply as a man who lives in a gold-plated tower ever could. He was going to save their jobs and make them prosper. He rode into office on their backs, backs bent with labor, backs salty with sweat, backs broken and disabled. And what has he given them in return? Nationalism. Divisiveness. Fear of nuclear war. American carnage. Covfefe. Tax reform.
That last one is tricky. In classic fashion, advocates of the GOP tax reform law have shouted the benefits from the highest hilltops, while saying not much of anything about the costs.
For example, take Bernie Marcus. He’s the co-founder of Home Depot who appeared on FOX News to tell the precariat just how good this tax reform is for them. What’s the prize? A thousand dollars! Well, at least if you’ve worked at Home Depot for two decades or more. (If you’ve only worked there a year or so, the bonus is only $200.) As quoted in The Blaze, Marcus crowed, “One thousand dollars is so meaningful…its more than meaningful — it could be paying the mortgage, it could be paying for a car repair, it could be paying for a past due bill.”
True enough. A one-time windfall of any size couldn’t hurt, and that’s in addition to the average family’s gain of less than $31 per week under the tax reform law. But it doesn’t hold a candle to the millions that President Trump stands to gain, and it doesn’t account for all the downsides that people will feel… later. The gain isn’t permanent for families and households, and the costs will mount. They’ll no longer be able to deduct their state and local taxes, the expected rise in health insurance rates due to the repeal of the individual mandate and the lower deduction for mortgage interest will sting, and wave goodbye to the personal exemption because that’s gone too.
Some companies taking advantage of their dramatic tax cut (the corporate rate will drop from 35% to 21% when they file 2018 taxes) to hand out cash bonuses now (from what cash reserves, if they’re so poor?) have been taking their pound of flesh in other ways. WalMart, who handed out similar one-time, mediocre bonuses and increases to their still poorly-paid staff, is also laying off workers and closing stores. Ditto for AT&T. Kimberly-Clark, maker of disposable diapers, is also disposing of employees, since they plan to use their tax windfall to restructure their company and send 5,000 or more workers packing. Wells Fargo – the bank that signed people up for accounts whether they wanted them or not – straight up admits that they’ll be handing their tax reform jackpot to their shareholders in the form of dividends and share buybacks. Hooray?
Some Companies Are Laying Off Employees Amid Tax Cut Savings, posted by Newsy.
While the grateful recipients of a few hundred dollars may finally afford Kimberly-Clark’s disposable diapers, what will our betters do with their disproportionately greater tax reform payouts? Likely, what the investor class often does: invest with the hopes of even greater capital gains down the road. Perhaps that’s why the stock market is up since Trump took office. Of course, using all that extra money not just to bid up the price of stocks, but also real assets like land and houses, makes it harder for everyday people of modest means to afford such things, even with that one-time bonus burning holes in the pockets of Home Depot and Walmart workers. Keen observers of history (or anyone who lost their retirement fund or home around 2008) should already know that bubbles also burst, and make life particularly hard for people without golden parachutes. Or healthcare. Or jobs.
Tax reform is like a night of binge drinking. It may be fun right now, but it probably won’t feel quite as good later, when we (as a country) wake up sick in an alley somewhere, fired from our jobs, deep in debt, surrounded by crumbling infrastructure, and we can’t even see a doctor. But hey – that bonus you had for a minute? It looks great in an investor’s pocket.
“The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover didn’t know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night, anyhow. But it will at least have passed through the poor fellow’s hands.” – Will Rogers in 1932.