In flat defiance of predictions that corporate executives would hoard the benefits of tax cuts, hundreds of companies have reacted to the new law by increasing wages, paying cash bonuses, and raising their benefit contributions.
It wasn’t supposed to be like this. Thoughtful experts spent much of the fall opining on television news shows that corporations would use the money from tax cuts to buy back shares of their own stocks or enrich their executives, while stiffing their employees.
But instead of a trickle down, there has been a flood of announcements of pay increases. AT&T, Bank of America, American Airlines and Comcast each will pay $1,000 bonuses to more than 100,000 employees. Large banks including Wells Fargo announced a raise in their minimum hourly pay rate from $12 to $15. Visa, Aflac and Nationwide said they will increase their matching contributions to employees’ 401(k) retirement plans.
Americans for Tax Reform, an organization that supported the tax cuts, is keeping a running list of companies that have announced payouts to employees. It estimates that over 2,000,000 people will receive “Trump Tax Reform Bonuses.”
Some have suggested that these payments are an attempt to curry favor with the White House, but the statements from companies announcing the bonuses suggest something else: a tightening and competitive labor market, leading to a sudden need to keep the workforce happy.
“Our employees are, by far, our greatest asset. It’s a pleasure to reward our team,” said Bank of Hawaii CEO Peter Ho, announcing $1,000 bonuses and a raise to $15 an hour. Countless statements from corporate communications shops celebrated employees as “our most important asset” and “our valuable team members.”
The signs that more hiring is on the way are everywhere, from a Florida towing company that said it is adding two more trucks to Apple’s announcement that it will hire 20,000 more employees.
By the way, it was comedian Will Rogers, not an economist, who first coined the term “trickle down” to describe a Republican tax plan. “The money was all appropriated for the top in the hopes that it would trickle down to the needy,” Rogers said. “Mr. Hoover didn’t know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night, anyhow. But it will at least have passed through the poor fellow’s hands.”
In saying that money was “appropriated for the top,” the joke assumes that all money belongs to the government, which gives it out as lawmakers see fit.
That’s what some California lawmakers believe too.
Assemblymembers Kevin McCarty, D-Sacramento, and Phil Ting, D-San Francisco, have just introduced a proposal to increase state taxes with a 10 percent surcharge on business income over $1 million. Assembly Constitutional Amendment 22 would create the “Middle Class Fiscal Relief Fund,” with the intention of grabbing the tax benefits from the new federal law. Then the state Legislature would distribute the money.
The proposal calls for the revenue to be spent on education, health care, child care and other benefits, but there’s a loophole. The law would allow “loans for cash flow purposes” between the Middle Class Fiscal Relief Fund and other “state funds or accounts.”
So while companies will be paying bonuses and creating jobs in other states, in California they’ll just be paying taxes, probably for pensions and the bullet train.
Even Will Rogers couldn’t make that amusing.
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