TaxProf Blog

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

Monday, October 8, 2018

WSJ: Tax Cuts Provide Limited Boost To Workers’ Wages

WSJWall Street Journal, Tax Cuts Provide Limited Boost to Workers’ Wages:

U.S. companies are putting savings from the corporate tax cut to use, but only a fraction of it is flowing to employees’ wallets, new data show.

In the months after the December tax-code overhaul that lowered the corporate rate to 21% from 35%, dozens of companies such as Walmart Inc. and FedEx Corp. announced one-time bonuses and wage increases for hourly workers. Those moves earned praise from the Trump administration as evidence the cuts were quickly reaching many Americans.

Now, various surveys indicate that most companies aren’t passing the money directly to employees.

A new survey of 152 companies by executive-recruitment firm Korn Ferry International revealed 14% were putting part of their tax-cut savings into base salary increases. A poll of 1,500 companies by consulting firm Mercer LLC showed 4% are redirecting tax savings to budgets for bigger paychecks in the coming year. And in a survey of more than 1,000 companies published by human-resources consulting firm Aon PLC, 99% said the tax cuts weren’t prompting them to increase minimum wages.

Companies are reluctant to grant higher-than-usual pay raises in part because it adds to their fixed labor costs, compensation experts said. ...

Along with the cuts, the tax overhaul also boosted incentives for business investment. The long-run economic case for the changes is that they will give companies more reason to invest in the U.S., which, over time, will increase worker productivity and step up pressure on companies to pay them more.

https://taxprof.typepad.com/taxprof_blog/2018/10/wsj-tax-cuts-provide-limited-boost-to-workers-wages.html

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Comments

Shocking. As predicted. Corporate America, beneficiary of the tax reform, sells out the politicians who took the heat for helping them.

Posted by: ruralcounsel | Oct 9, 2018 10:55:38 AM

@Ruralcounsel,

I don't think anyone believed that the corporate tax cuts were going to result in higher worker salaries; that was just the marketing operation. Those cuts worked EXACTLY as intended by both the GOP and corporate America: to keep the plutocratic donor class fat and happy.

Posted by: Unemployed Northeastern | Oct 9, 2018 10:55:48 PM

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