Remember when President Trump touted his $1.5 trillion tax revamp as the solution to America’s economic woes? Well, what has changed since the bill was signed into law late last year? No doubt economic growth has accelerated, however, wage growth has not. Meaning corporations are doing better while the average taxpayer isn’t. Trump cut taxes for the wealthiest, and 1,000 of America’s largest public companies cut jobs.
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And whether the economic boost will last is up for debate.
By all accounts, capital spending did increase this year. For companies in the S&P 500, capital expenditures rose roughly 20 percent in the first half of 2018. Much of that was concentrated: The spending of just five companies — Google’s parent, Alphabet, and Facebook, Intel, Exxon Mobil, and Goldman Sachs — accounted for roughly a third of the entire rise. Much of that spending went toward technology, including increased investment in data centers and computing, server, and networking capacity, the New York Times reported.
"Since the tax cuts were passed, the 1,000 largest public companies have actually reduced employment, on balance. They have announced the elimination of nearly 140,000 jobs — which is almost double the 73,000 jobs they say they have created" https://t.co/Rstdx4jyxW
— Judd Legum (@JuddLegum) November 13, 2018
Capital expenditures for companies in the S&P 500 increased about 14 percent to $715 billion. Research and development spending is projected to rise 12 percent to $340 billion, according to analysts at Goldman Sachs.
Looking at the broader picture, the economic surge in business investment wasn’t as high as it had been hoped. In the first quarter, there was 11.5 percent more business spending on fixed investment — machinery, buildings, and equipment. In the third quarter things slowed quite a bit — at an annual pace of 0.8 percent.
In reality, the tax cuts have not changed very much. A National Association for Business Economics study published in late October found that 81 percent of the 116 companies surveyed said they had not changed plans for investment or hiring because of the tax bill, the NYT reported.
Proponents of the tax cut claimed that by cutting and restructuring taxes for corporations, the economy would enjoy a boost and thus companies would invest more, increase their staff, and increase wages. None of this happened.
“If you call $225 as an annual pay increase ‘fattening paychecks,’ you’re as delusional as Trump, especially when, after taxes, it’s about half of that, and it doesn’t even cover the cost of living. And, it was a one-time thing. The federal government has to borrow a huge amount of money just to run the country. I would say this is a disaster waiting to happen,” the NYT reported.
Those backing the tax cuts also pushed the idea that the bill would boost economic growth so much, it would offset the decline in tax receipts.
“I’m totally convinced this is a revenue-neutral bill,” said Republican leader Senator Mitch McConnell of Kentucky in December 2017.
This has not come to be.
“Despite a remarkably strong economy, the fiscal health of the U.S. is deteriorating fast, as revenues have declined sharply. The federal budget deficit — the gap between what the government collects in revenues and what it spends — rose to $779 billion in the 2018 fiscal year, which ended Sept. 30. That was a 17 percent increase from the prior year,” the NYT reported.
Corporate tax revenues are down one-third from a year ago. Federal revenues as a whole ran $200 billion behind the Congressional Budget Office’s forecast for the 2018 fiscal year — even though economic growth was faster than the C.B.O. expected. The nonpartisan Committee for a Responsible Federal Budget reports that nominal federal revenues are down by at least 3.6 percent since the tax cuts took effect.
Whatever growth companies have seen, they haven’t passed it down to their workers. The average employee of a large company received about $225 this year in increased salary, according to nonprofit research group Just Capital. It’s a one-time bonus. And this amount depended on where they live. In California, workers got an average benefit of about $160 each — less than half the average benefit for workers in Kentucky.
Where are all the jobs that were promised with the tax cuts?
Many of these large corporations have cut jobs. Just Capital research shows that since the tax cuts were passed, the 1,000 largest public companies have actually reduced employment, on balance. They have announced the elimination of nearly 140,000 jobs — almost double the 73,000 jobs they say they have created during that time. About half of those net losses came from companies in the restaurant and leisure industries, the analysis found.
U.S. President Donald Trump arrives to attend a commemoration ceremony for Armistice Day, 100 years after the end of the First World War at the Arc de Triomphe in Paris, France, Sunday, November 11, 2018. (Benoit Tessier/Pool Photo via AP)Such spending is crucial to keeping economic growth strong. And strong growth is central to Republican claims that the tax cuts would ultimately pay for themselves.
Here comes the #MAGA crash:
— The stock market is now down for the year and 300 points lower than the day Trump signed the #TaxScamBill.
— The GOP added $2 trillion to the debt over next 10 years all to give massive tax cuts to the rich.
— Trickle down economics does not work.
— Ryan Knight ☘️ (@ProudResister) November 20, 2018
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