Florida senator and former presidential candidate Marco Rubio has become the latest Republican to attack the Trump company tax cuts as evidence mounts that the predicted investment surge from them has failed to appear.
“There is still a lot of thinking on the right that if big corporations are happy, they’re going to take the money they’re saving and reinvest it in American workers,” Rubio told the Economist in a profile piece. “In fact they bought back shares, a few gave out bonuses; there’s no evidence whatsoever that the money’s been massively poured back into the American worker.”
The comments from the Florida Republican contradict the core narrative of company tax cut proponents in the United States and in the Turnbull government, the Business Council and media commentators — that cashed-up companies will lift investment that will flow through to additional jobs, pushing wages up. In fact, as the Business Council showed last week, there are no cases from around the world where company tax cuts have ever led to higher wages; if anything, evidence from the United Kingdom shows real wages falling as companies get windfalls from governments.
Recent economic data reported in the New York Times appears to back up Rubio’s criticism: investment by US business in the first quarter of 2018 was significantly lower than in the comparable period in 2017. However, share buybacks have reached record levels — up over 50% on 2017 — as companies shower the tax cut windfall on investors. Apple’s stock price has been buoyed by expectations that the company will hand $150 billion of its tax windfall back to stockholders.
Must be up for re-election in 2018….
The only ‘shower’ that is impacting workers is surely not greenbacks. Always, cash stays with corporations, or go to shareholders. Trump’s tax beneficence has lodged exactly where was so designed to.
It’s not just the US Bernard, Canada has been going down this path since the 80’s. From the 80’s till around now they cut company tax from ~50% to ~26%.
Going by the Liberal and BCA fairy tails, things should be going gang busters in their economy right?
Not so much. Fixed capital (machinery, structures, etc.) shrunk by 1% of GDP, Business R&D shrunk 1/3rd as a share of GDP, to 0.8% of GDP and non-financial firms now hold cash and assets at over 30% of GDP. There is also signs that these cuts actually weakened growth and job creation.
I suspect the reason why, is that tax actually drove Canadian companies to actually innovate and they would spend more money to get ahead. Now they don’t need to.
https://newmatilda.com/2016/03/03/a-warning-from-canada-how-cutting-corporate-tax-did-more-harm-than-good/
Not surprising tinman. The perverse incentive of lower tax rates is that R & D costs more post-tax dollars, as do all other legitimate business expenses.
At a Senate enquiry only a couple of weeks ago, the Business Council of Australia’s CEO could not site just ONE country in the world where evidence showed corporate/ business tax cuts led to higher wages.
An embarrassing leak of a survey of BCA members proved the overwhelming majority of her members (83%?) would use the tax cut to buyback shares or pay higher dividends……ONLY. Admitting higher bonuses for executives was a step too far, at least in a survey,unlike the increased bonuses evidence in the US.
How can any Conservative possibly argue credibly that tax cuts magically leads to wage rises?