One year into the “Tax Cuts and Jobs Act”, the bill’s name remains only half accurate. Certainly taxes have been cut for the wealthiest and corporate executives have lined their pockets, however wages have remained stagnant. Shareholders have made a killing since the tax cuts, while economic gains for working class Americans have been marginal at best. (In fact, corporations are spending 128 times as much on stock buy backs as they are on worker bonuses and raises.) As for the latter part of the bill’s title, the New York Times reports that that the nation’s largest companies have actually cut more jobs than they have created since the bill’s inception.
The problem with last year’s tax giveaway package is that it was fundamentally based on several flawed assumptions. Supporters assumed the bill would incentivize corporations to hire more workers. They haven’t. They argued the cuts would lead to increased wages. They haven’t. What these tax cuts have produced is unsustainable short term economic growth that looks good on paper, but has disproportionately benefitted the wealthy. Instead of stimulating economic growth in Middle America, the tax cuts have contributed to increased economic consolidation around urban centers.
Like past attempts at “trickle-down” supply side economic policy, the Tax Cuts and Jobs Act has failed because of its inability to alter corporate incentive structures and in fact exacerbated the problem since CEOs pad their paychecks through bonus schemes supercharged by stock buybacks. And, while being marketed as a cure for Main Street’s modern woes, when it has actually exacerbated problems associated with a changing global economy like outsourcing of jobs and investment.
Across the board, corporations have focused their investments on stock buybacks rather than human capital. And, because of backward incentives in the law that give a sharply discounted rate for profits made by foreign subsidiaries, a fair amount of the investment has happened overseas by companies that simultaneously decreased U.S. manufacturing. This idea is perhaps best exemplified by the recent workforce cuts made by General Motors. After GM was bailed out by taxpayers in 2008 and saw their taxes cut in 2018, they are still closing plants across the Midwest, most notably in Michigan and Ohio and moving more production to Mexico. The company has framed these cuts as proactive cost saving measures as they prepare to shift towards electric and autonomous vehicle production, yet that hasn’t stopped workers from feeling any less betrayed by the false promises they were fed.
The harmful outcomes of the bill on working families will only get worse, as millions of Americans will be pushed out of health care coverage as healthcare premiums ultimately increase in addition to substantially ballooning the federal deficit, which has led conservatives to call for cuts to important government programs like Medicare, Social Security disability benefits, education, nutrition assistance and more.
It’s time for Congress to throw this scam of a tax giveaway package on the trash heap where it belongs and go to the table in a bipartisan way to discuss which loopholes in our tax code to close and which new revenue sources to put in place so that we can truly protect hardworking families and invest in American communities.