Employee Bonuses Down Sharply After 2017 Tax Cut: What Next?

One of the major selling points of the 2017 Republican Tax Cut was that it would boost wages for ordinary Americans – the people whose votes elect Trump – and who had seen a thirty year trend of near stagnant wages.

Immediately after the tax bill passed a few companies announced tax-cut based bonuses for their workers, which led to a lot of publicity about how the tax cut was working for all Americans. But this was only a few companies, and now the data is in for the workforce as a whole. Overall, bonuses are down approximately 22% across the board, this despite record profits, record low tax for corporations, record stock prices and massive stock buybacks.

Separate data show that the tax bill did not lead to the promised increase in investment (which would have led to more jobs) or to any meaningful increases in wages. In other words, typical Trump voters (as well as typical Clinton voters) got nothing in the aggregate. Big campaign donors did rather well off these cuts – which were stimulated when a group of Republican big-time donors started to threaten to cut their contributions if Congress didn’t give them something after the failure of the Republican effort to repeal the Affordable Care Act.

So what should be done? Why are wages stagnant (except for the wealthiest pockets of the economy. Its all well and good to rail against “socialism” but if capitalism isn’t delivering the goods, is it surprising that people – in particular young people – are tempted to explore alternatives?

If wages for average Americans were going up that would be a huge boost to President Trump’s reelection chances. What should he do to capitalize on that opportunity if anything?

This passage from your link seems to explain a lot

“Bonuses started taking off four years ago. Businesses have been electing to give workers short-term payouts for retention and morale, rather than longer-term wage increases the economy had experienced in previous decades. Anecdotally, the trend of bonuses rather than permanent wage increases continues. A recent report by the Federal Reserve showed employers in the Atlanta Fed district were “increasing the proportion of employee compensation that is not permanent and can be withdrawn, if needed.”

Much easier to give the random piece of candy once and a while instead of actually increasing the size of the pie.

That part of it is not surprising. As well, bonuses have the benefit of not compounding over time. 4 years of successive 3% wage/salary increases is greater than four years of successive 3% bonuses.

Regardless, I have little doubt which demographics will benefit from the Republican wealth redistribution.

Seriously? We all knew the top dogs were just gonna put any tax savings into their own pockets.

I don’t know who “we all” who knew this are? Are you saying the people who cheer Trump at his rallies when he claims (erroneously) that he delivered the biggest tax cut in history know this?

Increasing the pie can be a challenge… but there are conscious decisions about how to distribute the pie and for the past thirty years the trend has been to minimize wage increases (moving work offshore or to right-to-work states), blocking minimum wage increases, and regressive tax cuts that allow high wage earners to keep more of what the earn.

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There’s also this:

The biggest effect of the Trump tax cuts is obvious: People who own businesses and other sources of concentrated wealth will have a lot more money, and the federal budget will have less. But the advocates of the tax cuts insisted it wasn’t about letting the makers keep their hard-earned money rather than handing it over to the takers. It was about incentivizing business to repatriate funds and ramp up its investments, thereby increasing growth and wages.

The Congressional Research Service, a kind of in-house think tank for Congress, has a new paper analyzing the effects of the Trump tax cuts. It finds that none of those secondary effects have materialized. Growth has not increased above the pre-tax-cut trend. Neither have wages. After a brief and much smaller than expected bump, repatriated corporate cash from abroad has leveled off.

All we did is shift more money to the top at the cost of exploding the debt/deficit. And this study was conducted by the non-partisan Congressional Research Service.

I have contended for a long time that the most destructive words for the American Worker are “Increase Shareholder Value”

Until that basic economic philosophy is addressed, nothing will change.


This Op-Ed shows what Texas Instruments has done with the tax break windfall.

Some key parts.

“We haven’t seen the business expansion or increase in U.S. employment that many had hoped for, but companies are a lot more profitable,” said Howard Silverblatt, senior analyst for S&P Dow Jones Indices, which tracks buybacks and other metrics for the S&P 500.
For those 500 companies, which account for most of the stock market capitalization, the effective tax rate declined by almost 7 percentage points in 2018, he said. For S&P companies in information technology, including TI, Apple, Oracle and the like, the effective tax rate plunged by over 25 percentage points.
“That difference is pure cash,” Silverblatt said.

For TI, the lower tax rate translated into $1.3 billion in savings, according to TI’s 10-K filing, and its free cash flow jumped by a similar amount.
“Our strategy is to return all free cash flow to shareholders,” TI wrote in the 10-K.

TI increased spending on capital expenditures by $436 million last year, the biggest spurt since 2010. But it boosted dividends by a greater amount and spent an additional $2.5 billion on stock buybacks.
TI’s research and development spending rose by just $51 million last year. Total 2018 spending was over three times higher on stock buybacks than on R&D.

“What have we truly seen from the tax cuts? A lot of stock buybacks,” Rosenthal said. “The market is acting efficiently and rationally by taking these surplus profits and sending them to shareholders. It’s a demonstration that companies didn’t really have much use for the money.”

They “didn’t have much use for the money”

Let that part sink in.

The Op-Ed also goes into how companies are continuing to claim State and Local tax breaks from localities attracting industry. For example, TI received $5 million from the Texas Enterprise along with the Corporate Tax windfall. The largest portion of their profit spending going towards stock buybacks.

Seeing that the richest 1% owns 50% of the stock market, one can see who is getting the greatest benefit.

Someone should tell the New York Times about this, oh right, they looked at wages instead of finding something that didn’t improve to cherry pick it.

from Why Wages Are Finally Rising, 10 Years After the Recession - The New York Times

Average hourly earnings in April were 3.2 percent higher than a year earlier, the ninth straight month in which growth topped 3 percent, the Labor Department reported Friday.

Other measures diverge on the exact timing and rate of increase, but not on the basic trend: Wage growth, long stuck in neutral, has at last found a higher gear.

But its all going to the evil rich right? Umm no

Which workers are benefiting?

The recent gains are going to those who need it most. Over the past year, low-wage workers have experienced the fastest pay increases, a shift from earlier in the recovery, when wage growth was concentrated at the top.

And why weren’t they rising prior, well, it seems what Obama critics were saying about the job market not being as good as the UE numbers would make it seem were spot on.

The recent uptick in wage growth suggests a simpler explanation: Perhaps the job market wasn’t as good as the unemployment rate made it look.

The government’s official definition of unemployment is relatively narrow. It counts only people actively looking for work, which means it leaves out many students, stay-at-home parents or others who might like jobs if they were available. If employers have been tapping into that broader pool of potential labor, it could help explain why they haven’t been forced to raise wages faster.

It appears as if that is exactly what is happening. In recent months, more than 70 percent of people getting jobs had not been counted as unemployed the previous month. That is well above historical levels, and a sign that the strong labor market is drawing people off the sidelines.



yep, that’s some mighty strong evidence you have there. :laughing:

How’s the semiconductor industry doing lately with that trade war with China? Or are those numbers phony too? :roll_eyes:

We’ve known for decades that voodoo/trickle down economics don’t work. Unless you’re a high earner. But hey, let’s just make sure it won’t work this time, right?

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That perhaps was followed up with some pretty compelling evidence, ie the seventy percent of recent hires not being currently counted as unemployed.

See above

I read that article.

Crazy how the claim that the article itself wasn’t cherry picked was itself cherry picked to bolster an argument.

Someone should tell the Congressional Research Service:

Uhh…not too good it seems.

Regionally, sales increased slightly on a month-to-month basis in China (1.3 percent) and Europe (0.6 percent), but decreased in Asia Pacific/All Other (-1.9 percent), Japan (-4.5 percent), and the Americas (-6.7 percent). On a year-to-year basis, sales were down across all regional markets: Europe (-6.8 percent), Asia Pacific/All Other (-9.3 percent), China (-9.4 percent), Japan (-11.1 percent), and the Americas (-26.6 percent).

Speaking of cherry picking:

It was just the economy, stupid.


^^^^^^ Left out the next part where it says that low wage growth is from the raising of the minimum wage and not from the largess of Capitalism^^^^^^


You should have kept reading

But minimum wages are only part of the story. Ernie Tedeschi, an economist at Evercore ISI, estimates that the minimum-wage increases account for a quarter to a third of low-wage workers’ gains over the past three years.