Trump Tax-Cut Bonuses Are A Bust For Middle Class Workers, Wages Lie In A Wasteland Of Failed Promises

Trump tax cuts produce only share buybacks

No, the Trump tax breaks for major corporations are not going to bonuses and wage increases. Sure we’ve seen some token $1,000 bonuses go out to laborers with huge orchestrated fanfare. The stint of articles you saw all over the media earlier in the year about those bonuses originated from an organized PR campaign run by a conservative tax group, and have mostly now ended. Americans for Tax Reform, headed by Grover Norquist, encouraged companies at the start of the year to announce their distribution of tax savings to the lower rungs of personnel as a way of selling the Trump tax breaks after the fact. So far as I know, they are still encouraging that, but there isn’t much for them to report.

Even Republican Senator Marco Rubio, who voted for the Trump Tax Cuts as they stand now and who bills himself as a Reaganite, says there is no evidence that happy corporations are sharing the wealth with their workers:

“There is still a lot of thinking on the right that if big corporations are happy, they’re going to take the money they’re saving and reinvest it in American workers,” he says. “In fact they bought back shares, a few gave out bonuses; there’s no evidence whatsoever that the money’s been massively poured back into the American worker.” (The Economist)

Corporations have never given anything to workers that they weren’t forced to give, whether because of collective bargaining, the need to compete in a tough labor market or government mandates … or as a public-relations necessity. Anyone who thought corporate boards or CEOs were going to let some tax savings trickle down because they have enough money now to share the wealth a little has had no experience with corporations. Labor gets nothing that it doesn’t fight and bargain hard for in full Trumpian style.

You might have asked as I did why Republicans were talking at the beginning of this year about the “need to sell the tax cuts.” Why do you need to sell something after you’ve already passed it? Especially something that people naturally like! The only answers I could come up with were to stem the public outcry over the disproportional benefits to the top 1%, to dull the arguments of labor, and mostly to keep people believing in trickle-down economics so Republicans can give another big cut to the top 1% again someday.

Stock buyback bonanzas all over the board

Exactly, as I predicted last year, we now KNOW that the main flow of tax-break money has been into stock buybacks that make CEOs and their board members rich:

The Trump tax cuts are taking full effect. Corporations will pay $60 billion less in taxes this year. It appears they are taking all $60 billion in savings, borrowing another $80 billion from Wall Street, and buying back their own stock at near all-time high prices. If you thought the narrative about corporations using their tax savings to invest in new facilities and hiring thousands of new employees was going to happen, you haven’t been paying attention to how things work in the real world. [Instead, they are] pumping up the salaries and bonuses of top corporate executives. These sociopaths don’t give a crap about their shareholders, employees, or customers. Look at the amount of stock they bought back in 2007, just before the greatest financial collapse in modern history. (The Burning Platform)

And what are these corporate execs doing with their own money? They’re selling their own stocks into these buybacks.

Insider selling of their company stock is at record levels. The “smart money” is corporate insiders who know what is really happening inside their companies. As you can see, they knew what was happening in 2000 and 2007 as they bailed out before the stock market tanked. Observe what they are doing now.

You might recall me pointing that out early this year, too.

Bloomberg found that 60% of tax-cut savings will go to corporate share buybacks and 15% to workers. Morgan Stanley found that percentage for the workers was too high and projected that 13% will go to workers. Just Capital found Morgan Stanley’s number too high, too, and said that 6% will make it way to workers in the form of pay raises, bonuses or benefits. With 80% of stocks being owned by the top 10% in society, it’s not hard to see that all the money is pooling at the top. It’s a darn small trickle down from that congealed pool … as has always been the case.

You may recall my writing here that, if the Trump administration truly wanted to make corporate tax savings go to capital investment and to workers, it would have placed a limit against doing any stock buybacks for two years if a corporation opts for the lower tax rate. (Buybacks used to be illegal, and should still be, as they are regularly used to milk corporations of all their energy in order to make current stock owners rich while making the cooperation poorer, less adapted for the future, and less creative.)

General Electric dies from blood-sucking buybacks

General Electric makes a good current newsworthy example. Having engaged in $24 billion in buybacks in 2016 and 2017, this oldest stock on the Dow Jones Industrial Average was unceremoniously removed last week for being a failing dinosaur. It’s bones have been picked clean in $24 billion bites that were largely out of the company’s cash belly (with the rest achieved by adding to the corporation’s debt burden). That money would have served the company better if spent on creative development, rather than on making blood-sucking board members richer:

The root problem at GE — and why the stock is where it is — is poor capital allocation,” said RBC Capital Markets analyst Deane Dray. Shareholders normally love buybacks because they make shares scarcer and inflate a key measure of corporate profitability. “What did they get for it? Look where the stock is today,” said Dray. (Money)

Today, GE’s stock is worth less than before the buybacks! In fact, it’s almost just worthless. The buybacks happened at $30 a share. GE’s closing last week, after being stripped of its Dow honors, was at an emaciated $13 a share. The world’s longest-standing titan of heavy industry is on its way to becoming a penny stock, thanks to short-cycle thinking, self-centered, uncreative, unimaginative, morons that care only about pumping up short-term stock values.

According to GE’s CEO, however, decisions were “always made with the long-terminterests of the company in mind.” Can you swallow that and not gag? Maybe they were just made by stockholders on the board sucking the last drops of blood out of old brontosaurus in order to buy back their own shares before the behemoth lays down in the fossilizing muds of time and dies. (Not saying I know that, but it’s a reasonable question.) Ask yourself why board members deserve any increase of wealth from stock buybacks when they are presiding over the demise of the company over which they are supposed to be stewards!

Ironically, GE is now turning out the lights by selling off its iconic lightbulb business and is laying off 12,000 workers.

Some analysts have even suggested GE could have to reverse itself completely by selling shares to the public to raise cash. GE has said it’s not considering that.

Of course not. It doesn’t fit the self-saving, parasitic, instant interests of board members who perch on the old beast like pterodactyls, eating the meat of their own company — a practice made legal when buybacks were made legal.

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