Democrats Predicted The GOP Tax Plan Would Do Serious Damage. They Were Right.
Last November, Republicans touted their tax bill as a generous gift to middle-class families. They promised higher wages, more jobs, and more money in the pockets of working Americans. But Democrats saw through the lies and called the GOP’s bluff. Dems would not even dignify the legislation by calling it a “tax plan,” instead referring to it as “the GOP tax scam.” They warned that workers would see only marginal increases in their take-home pay, while corporations and wealthy investors would derive enormous benefit from the lower tax rates through stock buybacks. And, sadly, the Democrats predictions are proving to be right on the nose.
It’s been two months since the bill became law, and rather than creating new jobs and raising wages, companies are using the tax savings to line their shareholders’ pockets. According to the New York Times, 100 companies have announced plans to buy back stocks worth a total of $178 billion by the end of the first quarter of 2018. Stock buybacks take stocks off the market, effectively increasing the value of the stock that is already owned by shareholders.
Far from a “trickle-down” phenomenon, stock buybacks are merely a means for a public company to lavish its owners with kickbacks.
And because 10 percent of American households own 84 percent of all stocks (and 1 percent of households own roughly 40 percent of all stocks), there is no question who benefits from the buyback arrangement. It is not the middle class.
As the Times elaborates, stock buybacks “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. The buybacks are also most likely to worsen economic inequality because the benefits of stocks purchases flow disproportionately to the richest Americans.”
It wasn’t as if the Democrats were clairvoyant when they warned that the tax bill was not going to aid working Americans. Even before the bill passed, corporate executives were signaling that they would use the tax cuts to reward their investors.
Trump and other Republicans have argued that companies like Walmart have used the tax cut to increase wages and deliver bonuses to employees. However, as Think Progress notes, the wage hikes that Walmart offered were tiny (about $1 more per hour), just enough for the retailer to remain competitive. And the bonuses, which averaged about $200, cost the company a total of $400 million. But with the tax cuts delivered by the Republicans, Walmart will enjoy a yearly savings of $1.85 billion. The bonuses were a relatively inexpensive PR campaign on the heels of a massive influx of savings.
And while it feels satisfying to have confirmation that Republicans are greedy liars, it also means that the wealthiest Americans are getting even richer—while millions of workers are struggling just to get by.