Just how much of this Trump tax cut will really trickle down?
Since Republican leaders pushed through their once-in-a-generation tax overhaul, more than 70 major U.S. companies -- including Wal-Mart Stores Inc., Apple Inc. and JPMorgan Chase & Co. -- have announced either pay raises or bonuses for rank-and-file employees, or more hiring and investment.
That’s not all that many -- there are over 3,500 publicly traded corporations in the U.S., after all. And to some, they amount to little more than well-timed PR stunts designed to curry favor with the public and the president. But they’ve been enough to get some analysts rethinking just how much the $1.5 trillion package of cuts might benefit ordinary Americans and the broader economy.
One thing’s pretty certain: This is a good moment for workers. A tight labor market has pushed unemployment to historic lows and many economists see wage gains just around the corner. On top of that comes the big tax cut, which may encourage more companies to pass some of the savings onto employees, instead of simply reward shareholders.
“If the unemployment rate were 8 or 10 percent, you wouldn’t be seeing a lot of these announcements,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. Companies would still be investing in their businesses, but the “wage piece of it is probably driven primarily by the labor market.”
Of course, the benefits aren’t exactly raining down and most say it’s too early to tell if any of this will give a meaningful boost to growth. But for some, the trickle from the top -- a classic supply-side approach championed by Republicans -- has been a little bigger than initially expected.
With corporate profits as a share of GDP close to the highest levels in 70 years and labor’s share near an all-time low, some say something had to give.
Now, after the tax rewrite pushed the corporate rate down from 35 percent to 21 percent, executives may feel more compelled to share the savings, according to Goldman Sachs Group Inc. Even before the tax cut, a number of businesses like Wal-Mart were struggling to retain good help as an upswing in the economy pushed the jobless rate down to 4.1 percent.
“Competition for customers and employees may claim part of the potential tax benefit,” David Kostin, a strategist at Goldman Sachs, wrote this month.
With their slew of splashy announcements, there’s no question companies are trying hard to counter the perception they’re only interested in rewarding shareholders and offshoring American jobs to maximize profits.