Tax Cut Bill Won’t Flow Funds Into Job Creation And Higher Wages, CEOs Say

By on November 30, 2017

At a rally back in October in Pennsylvania, President Trump claimed that the tax reform bill he said he would shepherd through Congress would stimulate job creation and benefit the middle and working classes via higher wages and more disposable income. In a recent speech, House Speaker Paul Ryan said that “cutting the corporate tax rate means more jobs here in the United States. It will foster increased competition, which will directly drive up wages for our workers.”

Both men – as if we didn’t know it already – are full of crap regarding so-called benefits from the tax plan that will likely go to a Senate vote any day now. And leading corporate executives are even admitting it.

A few weeks ago, President Trump’s top economic adviser, Gary D. Cohn, asked a group of CEOs attending a Wall Street Journal conference if the tax cut will prompt them to invest in more jobs and raising wages. Only a few in the audience raised their hands. A seeming perplexed Cohn asked: “Why aren’t the other hands up?”

A robust economy expected to report record second quarter earnings isn’t already yielding greater investment in jobs and wages. And there’s no reason to expect that to change if the tax bill as it is currently written passes.

Bloomberg reported on Wednesday that “Major companies including Cisco Systems Inc., Pfizer Inc. and Coca-Cola Co. say they’ll turn over most gains from proposed corporate tax cuts to their shareholders, undercutting President Donald Trump’s promise that his plan will create jobs and boost wages for the middle class.” A Bank of America-Merrill Lynch survey last summer asked more than 300 major corporate executives how they would use a tax break. The answers in order were: Pay down debt, buy back stock, and pursue mergers. Yet the White House continues to push the bill as a measure that will benefit workers.

Bloomberg also notes how some corporate leaders oppose the bill because of its impact on the national debt and income inequality. “Starbucks Corp. Chairman Howard Schultz, Berkshire Hathaway Inc. Chairman and CEO Warren Buffett and BlackRock Financial Management Inc. Chairman and CEO Larry Fink have all publicly criticized the legislation. Goldman Sachs Group Inc. Chairman and CEO Lloyd Blankfein said this month that with the economy at nearly full employment and growing at 3 percent, now isn’t the best time for tax cuts,” it noted.

The New York Times reported last week how one union, the Communications Workers of America, “asked several companies that employ its members to promise to give workers a pay increase if the cut in the corporate tax rate goes through. The request, while unlikely to be heeded, highlights a critical question over who would benefit the most from the tax bill: shareholders or workers?”

And a Harvard-Harris Poll survey found that 54 percent of Americans oppose the Republican tax reform bill and say the plan is more likely to hurt than help them financially. Yet Trump and the GOP are hurrying to push it through before people realize that its consequences could harm the nation. This is not how a democracy is supposed to work.