Erica Werner of the Washington Post today asserts As GOP tax cuts take hold, Democrats struggle for line of attack based upon conservative Democrat Joe Donnelly’s reelection campaign in the deep red state of Indiana:
The new law is rising in popularity as businesses in Indiana and elsewhere trumpet bonuses and bigger paychecks. And while Donnelly and fellow Democrats struggle to craft a consistent attack on the law, Republicans — boosted by outside spending from groups backed by the billionaire Koch brothers and others — are united in touting the tax cuts and slamming moderate Democrats who voted against them.
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Americans have just started to see the tax cut show up in their paychecks this month, and along with those boosts in pay have come a spate of recent polls that show public opinion turning in favor of the tax legislation — leaving Democrats the unenviable task of trying to convince voters that a law increasing their paychecks now will be bad for the country later.
Werner is correct about the Koch brothers multi-million dollar GOPropaganda campaign to sell the GOP tax bill, and the resulting bump in polling (mostly from GOP-leaning voters responding to messaging for GOP tribalism). But there is contradictory evidence on any actual economic benefits of the GOP tax bill being noticeable in paychecks.
Jordan Weissmann writes at Slate, Americans Haven’t Noticed Trump’s Tax Cut in Their Paychecks. That’s Probably Because There Isn’t Much to Notice.
Republicans were convinced that once voters started seeing their take-home pay go up, they’d come around to Trump’s sole big legislative accomplishment.
It seems Republicans were half-right. This month, the law’s new withholding rules finally went into effect, and the tax cuts finally started showing up in workers’ pay-stubs. And while the bill does seem to be getting more popular, most voters still say they haven’t noticed any personal benefits.
A handful of polls have shown that the public is generally feeling more warmly about the tax cut than three months ago. According to the New York Times, support is up to 50 percent, from 37 percent in December. A Monmouth poll showed approval surging to 44 percent from 26 percent.
Still, the vast majority of adults don’t seem to have sensed the effects of the tax cut on their personal finances. In a poll by Politico and Morning Consult, just 25 percent of registered voters said they’d noticed their take-home pay increase as a result of the legislation. Another 51 percent said they hadn’t noticed a pay bump, and another 24 percent said they didn’t know or weren’t sure.
We can only guess why so few people are picking up on the fact that their taxes have gone down.
Weissmann concludes that “if Americans aren’t noticing the tax cut in their take-home pay now, chances are they aren’t going to notice it later, either—meaning this may be as popular as the bill ever gets.”
Cody Fenwick similarly notes at Salon, People are starting to realize the GOP tax bill was a massive scam:
A survey from Politico and Morning Consult found that only 37 percent of employed people have seen an increase in their paychecks since the law went into effect, while 53 percent of people have not noticed a change.
One big difference between the people who are seeing a pay increase and those who aren’t? Income.
“Our polling shows high-income earners are more likely to have noticed an increase in their paychecks as a result of the tax bill,” said Kyle Dropp, Morning Consult’s co-founder and chief research officer.
Only 16 percent of people with an income under $50,000 a year said they noticed a pay increase. That number rises to 33 percent of people with income between $50,000 and $100,000, and 40 percent for people who make more than $100,000.
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Oh, and those meager individuals tax cuts that only some people are seeing? The tax bill actually phases them out over the next ten years. By the end of a decade, taxes on many people are slated to go up.
And the GOP claims that the tax cuts for corporations would trickle-down to higher wages for workers? Yeah, not so much. Trump’s Tax Cuts in Hand, Companies Spend More on Themselves Than on Wages:
President Trump promised that his tax cut would encourage companies to invest in factories, workers and wages, setting off a spending spree that would reinvigorate the American economy.
But so far, companies are using much of the money for something with a more narrow benefit: buying their own shares.
Those so-called buybacks are good for shareholders, including the senior executives who tend to be big owners of their companies’ stock. A company purchasing its own shares is a time-tested way to bolster its stock price.
But the purchases can come at the expense of investments in things like hiring, research and development and building new plants — the sort of investments that directly help the overall economy. The buybacks are also most likely to worsen economic inequality because the benefits of stocks purchases flow disproportionately to the richest Americans.
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What companies do with the trillions of dollars they’re bringing back to the United States [“repatriation’], and the money they will save each year on their tax bills, will in large part determine whether the plan is a success or a failure.
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[T]he buying back of shares is also at record levels.
Almost 100 American corporations have trumpeted such plans in the past month. American companies have announced more than $178 billion in planned buybacks — the largest amount unveiled in a single quarter, according to Birinyi Associates, a market research firm.
Such purchases reduce a company’s total number of outstanding shares, giving each remaining share a slightly bigger piece of the profit pie.
Cisco said this month that in response to the tax package, it would bring back to the United States $67 billion of overseas cash, using $25 billion to finance additional share repurchases. Alphabet, the parent company of Google, authorized up to $8.6 billion in stock purchases. PepsiCo announced a fresh $15 billion in planned buybacks. Chip gear maker Applied Materials disclosed plans for a $6 billion program to buy shares. Late last month, home improvement retailer Lowe’s unveiled plans for $5 billion in purchases.
On Monday, Mr. Buffett said on CNBC that Berkshire might be open to buy some of its shares. The remarks helped send Berkshire’s stock — and the broader market — higher.
More buybacks are almost certainly on the way. UBS analysts covering Apple said the iPhone maker might authorize another $30 billion in share purchases when it reports its next quarterly earnings in April. That would be on top of the $30 billion it already spends each year to buy back its shares.
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The flurry of planned buybacks has been good for the stock market. Early this month, stocks were down more than 10 percent from their January peak. The prospect of companies flooding markets with “buy” orders helped the market recoup some of its losses.
The broader impact on the economy is less clear. Economists believe a rising stock market benefits the economy, helping support consumer and business confidence. But the vast majority of the billions of dollars in planned share purchases will benefit the richest 10 percent of American households, who own 84 percent of all stocks. The top 1 percent of households own about 40 percent of all stocks.
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At a news conference Thursday, the head of the White House’s Council of Economic Advisers, Kevin Hassett, acknowledged that many companies were spending their money on buying their own shares.
“Right now we’re going to have an adjustment where you see probably more dividends and share buybacks than wage increases,” Mr. Hassett said. “But going forward we’re going to see a lot of capital formation and wage growth.” (“Look man, I ain’t fallin’ for no banana in my tailpipe!“)
That is not what happened in 2005, when a one-time tax holiday allowed companies to repatriate money on the cheap. That plan, championed by President George W. Bush, was sold as a way to get American companies to invest more in the domestic economy [just as the current GOP tax bill was].
Some $300 billion came back to the United States that year. But economists estimated that as much as 92 percent of it may have been paid out to companies’ shareholders — mostly in the form of buybacks.
Studies have shown that the tax change lifted companies’ stock prices but did not expand their American work forces.
Charlie May at Salon cites a Politico report for what Democrats warned you about last December. Trump’s tax plan is riddled with defects, forcing the GOP to ask for help:
It should come as no surprise that the deeply unpopular tax overhaul — rushed through Congress and signed by President Donald Trump in late December — is extraordinarily flawed. And now, they need the help of the Democrats.
The GOP’s plan has hit several snags as it’s been implemented in recent weeks and months, affecting dozens of things from tax write-offs for restaurants and retailers to the president’s own real estate business, Politico reported. ‘This is not normal’: Glitches mar new tax law.
“This is not normal,” Martin Sullivan, chief economist at the nonpartisan Tax Analysts said of the technical difficulties the law has had. “There’s always this kind of stuff, but the order of magnitude is entirely different.”
Politico elaborated on what damage is being done with this tax bill:
Another would allow wealthy money managers to sidestep a crackdown on lucrative tax breaks that allows them to pay lower taxes on some of their income than ordinary wage earners. A third creates two different start dates for new rules that make it harder for businesses to shave their tax bills.
[. . .]
Another bug may allow hedge funds, private equity firms and others to dodge a crackdown on the rules surrounding so-called carried interest by taking advantage of a vague reference in the law excusing corporations from the new rules. Lawmakers appear to have meant C corporations like Apple or Ford, but lawyers say it could also excuse S corporations, which could be easily used to duck the restrictions.
It’s obvious that this would be the result of a one-sided piece of legislation that was secretly written and rushed through Congress with next to no substantive discussion.
Republicans are now looking for ways to fix the law, and include those fixes in a bill that’s needed to fund the government, Politico noted. Conservative lawmakers are now, however, faced with the problem of having to work with the Democrats who aren’t exactly eager to come their assistance.
“We’re not going to say to Republicans, ‘Oh tell us what you want to do,’” Sen. Sherrod Brown, D-Ohio said. Brown is a member of the tax-writing Finance Committee. “We want to make the bill better, not just correct whatever technical fix is needed.”
Berkshire Hathaway CEO Warren Buffett is a perfect example of how the tax plan is not only just a fundamentally sloppy piece of legislation, it’s also panning out exactly as was foretold. Buffet announced on Saturday that Berkshire Hathaway made a net gain of $65.3 billion in 2017, but that “only $36 billion came from Berkshire’s operations.”
The rest of the gains, roughly $29 billion, came from the tax plan [i.e., a corporate welfare windfall]. “A large portion of our gain did not come from anything we accomplished at Berkshire,” he wrote, according to CNN.
Yet, since the bill was passed, Trump has taken the time to tout it repeatedly and has lauded companies that said they would gift employees with $1,000 bonuses as a result of the plan. While a handful of corporations did promise one-time bonuses, many also discreetly consolidated their operations and laid off hundreds, if not thousands of employees.
That one-time Christmas bonus doesn’t do workers much good when it is followed up by a layoff notice in the new year. But the shareholders in The Predator Class are getting richer, so it’s all good in GOP land.
UPDATE: Alan Krueger and Eric Posner write at the New York Times, Corporate America Is Suppressing Wages for Many Workers: A growing body of evidence pins much of the blame for wage stagnation on a specific culprit, “monopsony power.” This term is used by economists to refer to the ability of an employer to suppress wages below the efficient or perfectly competitive level of compensation. Many corporations possess bargaining power over their workers. Their workers accept low wages and substandard working conditions because few alternative job opportunities exist for them or because switching jobs is costly. In other words, in the labor market, effectively a small number of employers are competing for their labor.
Paul Waldman writes at the Washington Post, Shocker: Democrats’ predictions about the GOP tax cut are coming true: Democrats said the GOP tax bill was a scam. They charged that workers would see only a fraction of the benefits, and instead corporations would use most of their windfall for things like stock buybacks, which increase share prices and benefit the wealthy people who own the vast majority of stocks. Well, it has been only two months since President Trump signed the bill into law, and we’re already learning what anyone with any sense knew at the time: Everything Democrats predicted is turning out to be right.