A new study reveals that Trump’s tax cuts for the rich provided no positive impact on jobs in the United States.
In a post for the Columbia Law School blog, the authors of a study titled Corporate Behavior and the Tax Cuts and Jobs Act summed up their findings that Trump’s tax cuts did not create jobs:
Our analysis examined how the change in effective tax rate affected measurable corporate behavior, as reported in the first set of post-TCJA 10-K filings, which covered the 2018 corporate fiscal year. We considered the top 100 companies in the S&P 500, excluding financial companies and firms that had not filed 2018 annual results at the time of the study. To represent the period before the passage of the TCJA, we considered the change in both the effective tax rate from 2017 to 2018 and the effective tax rate calculated as an average from 2015, 2016, and 2017 to 2018. We then compared these changes with several dependent variables to determine the effect, if any, on corporate behavior. The 12 dependent variables against which the change in effective tax rate were tested are (1) number of employees; (2) dividends paid; (3) capital expenditures; (4) cash flow from operations; (5) market value; (6) capital expenditure ratio; (7) research and development ratio; (8) EBIT; (9) EBITDA; (10) total executive compensation; (11) CEO compensation; and (12) total value of shares repurchased.
Our analysis reveals that few corporate behaviors were significantly affected by change in effective tax rate. This includes two specific corporate behaviors – number of employees and capital expenditure ratio – which TCJA proponents indicated would change due to decreased corporate tax rates. The only dependent variables showing any statistical significance were CEO compensation, using the single base year of 2017, and total value of shares repurchased, using the 2015-2017 average. This implies that the decrease in effective corporate tax rate bears little if any relationship to the indicia predicted by the law’s proponents, but may bear some relationship to both increased CEO compensation and total value of shares repurchased.
According to the study, the only metric that increased due to Trump’s tax cuts for the rich was CEO compensation. The biggest corporations did not put the tax cut into investment in their businesses or hiring more employees. The corporations bought back stock and increased CEO pay.
The Trump tax cuts were a flop. Everything that Trump and the Republicans promised would happen if taxes were cut for the wealthy and corporations did not occur. To put it another way, Trump and the GOP lied. The tax cuts are so politically toxic that even Trump has stopped mentioning them at his emotional support rallies.
The tax cuts were a flop, which why Republicans are pretending like they never happened.
Mr. Easley is the founder/managing editor and Senior White House and Congressional correspondent for PoliticusUSA. Jason has a Bachelor’s Degree in Political Science. His graduate work focused on public policy, with a specialization in social reform movements.
Awards and Professional Memberships
Member of the Society of Professional Journalists and The American Political Science Association