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Corporate Tax Cuts Have Enriched Wealthy Investors; Haven't Increased Workers' Wages

As many economists predicted, corporations which received a massive tax cut in 2017 didn't use much of their windfall to hire more workers or increase wages. Instead they increased dividends and repurchased their own stock making outstanding shares more valuable and enriching investors.

From Money: Michael Patcher, an analyst at Wedbush Securities, “The tax law didn’t do anything to provide an incentive to employers to create jobs. There’s nothing in there that would suggest that employers have a particular incentive to hire more people or pay the ones that they have more money.”

A few companies gave one-time bonuses to employees at the end of 2017, but that's not where the vast majority of the tax cut money went.

From Money: "Companies are on track to plow a record $1 trillion into boosting dividends and buying back their own stock this year, says Howard Silverblatt, senior index analyst S&P Dow Jones Indices."

Stock buybacks enrich wealthy investors, but do almost nothing to boost the economy or assist blue-collar workers who own very little stock. And, these "record-breaking buybacks are especially great news for executives at the companies whose compensation is tied to the stock price because it makes the stock more valuable."

And, that may not be the worst of the results from the corporate tax cuts. New research of state corporate tax cuts by Juan Carlos Suarez-Serrato, of Duke University, Ethan Rouen, from Harvard Business School and Suresh Nallareddy of Duke University suggests that these cuts also tend to increase income inequality because most of the benefits will flow to the richest investors rather than workers.

From the Hill: "The state-level trends we found do not bode well for the new federal tax cuts. Instead, the evidence strongly suggests those cuts will increase income inequality.

And Congress may make the problem even worse. Congress has yet to decide how to make up for the lost tax revenue. If it pays for tax cuts with cuts to government spending, that would further hurt the average worker, since research shows public spending cuts disproportionately harm low wage workers."

By: Don Lam & Curated Content


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