Tax Cuts Won’t Go to Job Creation—Just Listen to the CEOs
By Justin Miller | Nov 29, 2017
It’s becoming increasingly clear that the Republican tax scheme is going to pass. And already, corporate executives are undermining the GOP’s claim that their gigantic corporate tax cuts will be funneled directly into job-creating investments in the United States.
Some of the country’s largest and most profitable companies are saying that they’ll be sending tax savings straight to the shareholders. Pfizer, Coca-Cola, and IT giant Cisco have all said that they intend to reward shareholders with increased dividends and lucrative share buybacks, Bloomberg reported Wednesday.
“We’ll be able to get much more aggressive on the share buyback,” once the tax plan is passed, Cisco CFO Kelly Kramer told Bloomberg.
Of course, this shouldn’t surprise anyone. The Trump administration and GOP leaders have been going on and on about how their tax cuts and the tax repatriation holiday that allows companies to bring their trillions in offshore cash back at a bargain rate will spur unprecedented rates of economic growth and job creation.
But CEOs have been telegraphing their true intentions for a long time.
On an earnings call a year ago, Cisco, which has $58 billion stashed abroad, was already talking about how corporate tax cuts would allow the company to hand out buybacks and ramp up mergers and acquisitions, The Intercept reported in January. Hewlett Packard, with $47 billion in overseas profits, was also boasting about how any tax savings would go straight to shareholders.
The last time Republicans passed a tax holiday for overseas profits, the 15 companies that benefited most ended up cutting more than 20,000 net jobs and curtailing research investment. Instead, they pushed their cash piles into their shareholders’ pockets.
Earlier this month, at a Wall Street Journal event for corporate CEOs featuring Trump’s top economic advisor (and former Goldman Sachs executive) Gary Cohn, the moderator asked the high-powered audience: “If the tax reform bill goes through, do you plan to increase investment—your company’s investment, capital investment?”
Just a few hands went up. A flummoxed Cohn asked, “Why aren’t the other hands up?”
CEOs are so emboldened these days that they don’t even feel compelled to offer the typical obligatory bromides about job creation and investment.
The GOP tax plan is already a naked redistribution of wealth to the upper class—a ploy that will ultimately be funded on the backs of the middle and working classes. A share buyback bonanza will only further enrich those who can afford to invest in the stock market—the wealthy and upper middle class.
The modern corporate strategy is to immediately maximize profits by any means available—be it through cutting labor costs or limiting long-term investments or securing tax cuts in Congress—and then funnel those profits to the shareholders, who will reward the CEO with a hefty bonus. It is not, as Republicans would have you believe, to build new U.S. factories or lift up wages for employees.
Just listen to the CEOs.
Tax Cuts for the rich. Deregulation for the powerful. Wage suppression for everyone else. These are the tenets of trickle-down economics, the conservatives’ age-old strategy for advantaging the interests of the rich and powerful over those of the middle class and poor. The articles in Trickle-Downers are devoted, first, to exposing and refuting these lies, but equally, to reminding Americans that these claims aren’t made because they are true. Rather, they are made because they are the most effective way elites have found to bully, confuse and intimidate middle- and working-class voters. Trickle-down claims are not real economics. They are negotiating strategies. Here at the Prospect, we hope to help you win that negotiation.