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Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, January 31, 2018

NY Times: Corporate Tax Cuts Are Raising Pay Of Bosses, Not Workers

New York Times editorial, Are Corporate Tax Cuts Raising Pay? Yes, for Bosses:

Recent announcements by Apple, Walmart, AT&T, Starbucks and other businesses that they are giving workers raises, repatriating foreign profits and investing in the United States because of the tax bill Congress passed last year are clearly music to the ears of President Trump and Republican lawmakers. But these statements are also cleverly designed public relations spin that tells us little about the actual long-term economic impact of the tax law.

Let’s put some context around these corporate proclamations. The economy is humming, with the unemployment rate at 4.1 percent. This is, of course, very good news. But beware the spin: Regardless of what’s in the tax overhaul, businesses have an incentive to raise wages to retain and attract workers because of the tight job market. It is also very much in the political interest of companies to attribute to the new tax law the changes they make to salaries or investment plans. That’s a surefire way to win favor with Mr. Trump, a notorious sucker for flattery. And it is a way to deflect attention from the insidious aspects of the tax law: It will add about $1.5 trillion to the federal deficit over 10 years, and many poor and middle-class families will pay more taxes over time.

It’s the corporate elite who stand to benefit most from the tax law. Lloyd Blankfein, the Goldman Sachs chief executive who supported Hillary Clinton in the 2016 election, told CNBC recently that he “really liked” what the president is doing for the economy. ...

As many experts have pointed out, corporate tax cuts passed by Congress and signed into law by President Ronald Reagan in the 1980s did not turbocharge wages or investment. Similarly, a series of corporate tax cuts in the last 10 years or so by Labour and Conservative governments in Britain — to 19 percent, from 30 percent — did not produce a boom in wages or investment. In fact, wages grew faster in the United States, according to an article on Vox by Kimberly Clausing, an economics professor, and Edward Kleinbard, a law professor.

It’s great that after decades of anemic wage growth, some workers are finally getting a raise. But if President Trump and the Republicans in Congress were serious about helping workers via the tax code, they had obvious options open to them: They could have cut taxes on the middle class and expanded the earned-income tax credit for poorer workers. Instead, they chose to write giant checks to big investors on the accounts of future generations. ...

As many experts have pointed out, corporate tax cuts passed by Congress and signed into law by President Ronald Reagan in the 1980s did not turbocharge wages or investment. Similarly, a series of corporate tax cuts in the last 10 years or so by Labour and Conservative governments in Britain — to 19 percent, from 30 percent — did not produce a boom in wages or investment. In fact, wages grew faster in the United States, according to an article on Vox by Kimberly Clausing, an economics professor, and Edward Kleinbard, a law professor.

It’s great that after decades of anemic wage growth, some workers are finally getting a raise. But if President Trump and the Republicans in Congress were serious about helping workers via the tax code, they had obvious options open to them: They could have cut taxes on the middle class and expanded the earned-income tax credit for poorer workers. Instead, they chose to write giant checks to big investors on the accounts of future generations.

https://taxprof.typepad.com/taxprof_blog/2018/01/ny-times-corporate-tax-cuts-are-raising-pay-of-bosses-not-workers.html

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Comments

All I can say is "triangulate your news." Always consider the source. I never take a NYT piece at face value.

Posted by: Tom N | Jan 31, 2018 3:30:43 PM