A funny thing happened to the much ballyhooed Republican tax bill.
Reality set in.
In an article entitled “Blue-Collar Trump Voters are Shrugging at Their Tax Cuts,” The New York Times interviewed workers in the Dayton, Ohio, area. It reported:
“The white working-class voters in the industrial Midwest who helped put Mr. Trump in the White House are now seeing the extra cash from the tax cut, the president’s signature domestic policy achievement and the foundation for Republican election hopes in November.
“But the result has hardly been a windfall, economically or politically. Workers described their increase as enough for a week’s worth of gas or a couple of gallons of milk, with an additional $40 in a paycheck every two weeks on the high side to $2 a week on the low. Few are complaining, but the working class here is not feeling flush with newfound wealth.”
The New York Time’s Paul Krugman wrote in an opinion piece entitled “Taxpayers, You’ve Been Scammed” that “most of the tax cut actually consisted of huge tax breaks for corporations, which is in effect a big tax cut for stockholders. (More than 80 percent of stocks are owned by the wealthiest 10 percent of the population) … So on the face of it, the wealthy are giving themselves a big gift, and sending the bill to the middle class.”
As for the claim that the benefits of lower corporate taxes will “trickle down” to workers Krugman makes these points:
*“If the process were to work as advertised, it would take a long time – probably decades.”
*“Corporations with monopoly power won’t see lower taxes as a reason to invest more; they’ll just take the money.
*“There’s growing evidence that big companies are using their power to suppress wages; cutting taxes won’t change that fact.”
Last month the Washington Post ran an opinion piece entitled “Shocker: Democrats’ Predictions About the GOP Tax Cut are Coming True.”
The author, Paul Waldman, noted that the tax bill cut the statutory corporate tax rate from 35 to 21 percent, accounting for about $1 trillion of the bill’s total $1.5 trillion cost.
He said that while the Republicans talked of a “trickle-down” effect where companies would use the money to create new jobs and raise wages, the Democrats called it a scam in which workers would see only a fraction of the benefits as most of the money would go to stock buyouts that benefit the wealthy people who own the vast majority of stocks.
“We’re already learning what anyone with any sense knew at the time,” Waldman wrote. “Everything the Democrats predicted is turning out to be right.”
Almost 100 American corporations have announced more than $178 billion in planned buybacks, the article reported. This is the largest amount unveiled in a single quarter, according to Birinyi Associates, a market research firm.
A company purchasing its own shares is a time-tested way to bolster its stock price, so buybacks are good for shareholders, including the senior executives who tend to be big owners of their companies’ stocks, Waldman explained.
He added that 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.
“(Democrats) applied logic, looked at data and understood history. Republicans, on the other hand, were spinning out a ludicrous fantasy with no basis whatsoever,” Waldman wrote.
Speaking of history, the Republicans have tried to sell this bill of goods before.
The Times reported in “Trump’s Tax Cuts in Hand, Companies Spend More on Themselves Than on Wages” that in 2005 a one-time tax holiday allowed companies to repatriate money “on the cheap.”
President George W. Bush claimed it was a way to get American companies to invest more in the domestic economy. But, it turned out that of the $300 billion that came back to the United States that year, economists estimated that as much as 92 percent of it may have been paid out to companies’ shareholders – mostly in the form of buybacks.
Republicans are going to run hard on the tax bill in this year’s elections. The fact is the benefit to the middle class is dwarfed by the benefit to the rich and corporations.
House Minority Leader Nancy Pelosi’s comment that the middle class was receiving “crumbs” in the deal was idiotic, not because they aren’t getting the short end of the stick, but because for a lot of people any kind of extra money is a big deal.
Still, we’re set to increase our already gigantic deficit due to a bill in which Republican legislators made sure to take care of their rich donors and themselves first and foremost.
That doesn’t seem like something that should earn the vote of the poor and middle class in this country while they watch the rich just keep getting richer, more powerful and more able to advance an even more damaging agenda against working-class Americans.
***
You can read all my blog posts at Musings of a Nobody.
Please share and subscribe via email if you like it.