Donald Trump’s presidency has been marked by turmoil, and his approval ratings are low. But US CEOs seemed eager to show their support for his first major piece of legislation, the “Tax Cuts and Jobs Act” that cleared Congress on Wednesday (Dec. 20). A clutch of big US banks and telecoms pledged to hand out millions in bonuses off the back of tax reform.
Donald Trump’s presidency has been marked by turmoil, and his approval ratings are low. But US CEOs seemed eager to show their support for his first major piece of legislation, the “Tax Cuts and Jobs Act” that cleared Congress on Wednesday (Dec. 20). A clutch of big US banks and telecoms pledged to hand out millions in bonuses off the back of tax reform.
In carefully crafted announcements released within minutes of Trump’s White House press conference, banks and telecoms announced commitments of more than $2 billion in bonuses, donations, and investments (this calculation doesn’t account for wage hikes, which were impossible to quantify given the information available). In press releases and on Twitter $TWTR, the companies praised the tax bill for its salutary effects on workers’ wages.
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Critics charge the handful of companies pledging money this week is a political ploy to distract from the vast majority of benefits flowing to shareholders rather than workers and the middle class.
The amount announced so far is a small fraction of the total tax savings the bill is expected to hand to corporations in the coming years. Overall, lowering corporate taxes is expected to save companies $1 trillion over the next decade.
Earlier this year, the White House Council of Economic Advisers (CEA) said that dropping the corporate income tax rate to 20% (the new bill makes it 21%) would increase household incomes by at least $4,000 annually. Most economists, including Kimberly Clausing of Reed College, dispute those “wildly optimistic numbers,” arguing that there’s a tenuous relationship between lower corporate taxes and higher wages.
Economic theory suggests that taxes on corporate profits—including benefits from tax cuts—are mostly borne by shareholders. “Deficit-financed corporate tax cuts are more likely to hurt workers than help them,” Clausing wrote in an analysis of the tax reform bill.
Still, these CEOs may be the first of many to attribute raising wages (which have been recovering as the labor market tightens) to Washington policies. Several corporations have made a point of giving Trump credit for job and investment announcements: Dow Chemical, Carrier, IBM $IBM and Softbank have all done so in the last year (often referring to plans or investments that predated Trump). “Now, whenever an executive raises wages, they will make sure to thank tax ‘reform’ to try to take some heat off Congress, which has just given them a truly enormous Christmas gift,” Clausing wrote by email.
Companies making the Dec. 20 announcements tied to the tax bill were likely planning these moves as well. “I would be surprised if the changes were due to tax reform, given how quickly the changes were announced,” said William Gale, co-director of the Tax Policy Center, a joint venture between Brookings Institution and the Urban Institute. “But I certainly understand why the companies might want to say it was due to tax reform.”
