This should have come as no surprise to anyone because, even before the 2017 tax law passed, major companies including Cisco, Pfizer, and even Coca-Cola made it clear that they would use any new windfall not for investment, but to buy back stocks – which passes any gains to their shareholders and executives, not employees. No “trickle-down” happening here, boys!

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< Sidebar: In a stock buyback (a.k.a. share repurchase), a company buys back its own shares from the marketplace. They do this, in part, to reduce the number of shares that are available on the open market, which ultimately increases the value of those shares (i.e., supply and demand). Buybacks can also increase equity value, make a company look more financially sound, and allow a way for money to be returned to investors.

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This buyback strategy is dubious, to say the least (and that’s being generous). For one, there is a massive conflict-of-interest because the executives of these companies have millions and millions of incentives to buy back stock, regardless of whether its best for their companies.

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Robert J. Jackson Jr., a former commissioner of the U.S. Securities and Exchange Commission appointed by Donald Trump, put it this way at the time: “There is clear evidence that a substantial number of corporate executives today use buybacks as a chance to cash out the shares of the company they received as executive pay. We give stock to corporate managers to convince them to create the kind of long-term value that benefits American companies and the workers and communities they serve. Instead, what we are seeing is that executives are using buybacks as a chance to cash out their compensation at investor expense.” >

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To be fair, companies were honest about their intentions from the start. In fact, at a meeting of The Wall Street Journal CEO Council in November 2017, the CEOs in attendance were asked to raise their hands if they intended to use their new fortune for investment. Gary Cohn, the former COO of Goldman Sachs who at the time was Donald Trump’s top economic adviser, seemed perplexed that very few hands were raised. “Why aren’t the other hands up?” he asked.

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This didn’t get any better as time went on. The Federal Reserve Bank of Atlanta periodically surveys business executives. According to the results of their survey after the 2017 tax bill passed, “roughly two-thirds of respondents indicated that tax reform hadn’t enticed them into changing their investment plans for 2018.” The survey also asked the respondents about their investment plans for 2019: “The results were not statistically different from their 2018 response. Roughly three-quarters of firms didn’t plan to change their capital expenditure plans in 2019 as a result of the [tax cuts].”

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As promised, buybacks soared. According to the S&P Dow Jones, “In Q4 2018, S&P 500 stock buybacks, or share repurchases, set a fourth consecutive record of $223 billion. This displaced the previous record of $203.8 billion, set during Q3 2018 and is a 62.8 percent increase from the $137 billion reported for Q4 2017. For the year 2018, buybacks set an annual (and 12-month) record of $806.4 billion, up 55.3 percent from the prior year’s $519.4 billion, and up 36.9 percent from the prior annual record set in 2007, of $589.1 billion.” The following year, they reported that: “Buybacks for the full year 2019 were $728.7 billion.” In the 4th Quarter of 2019, Apple continued to lead, spending $22.1 billion – up from last quarter’s $17.6 billion, and ranking as the 3rd highest expenditure historically.”

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A paper from the National Bureau of Economic Research (NBER) revealed that “the average annual inflation-adjusted amount paid out through dividends and repurchases by public industrial firms was more than three times larger from 2000 to 2019 than from 1971 to 1999.”

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What’s really infuriating is that many of the companies that benefited mightily from the 2017 corporate tax cut – only to buy back shares – went crawling to the federal government (i.e. YOU and US) for help during the Covid-19 economic crisis just a couple of years later – crying poor, with their hand firmly out.

 

After telling his investors, “I don’t think we’re ever going to lose money again” after their big tax cut windfall, American Airlines CEO Doug Parker happily and without hesitation accepted a large chunk of the $54 billion that the U.S. government (i.e. YOU and ME) gave the airline industry during the Covid-19 crisis. It’s just ridiculous we put up with this.

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When you hear these facts, it’s hard to deny that the 2017 Republican tax cuts cost far too much for far too little. By passing this law, the first Trump administration and congressional Republicans sold most Americans out. Straight up. Worse, it’s not like they didn’t know they were selling Americans a bill of goods. Not only did they have history as a guide but, even at the time, plenty of people were waving huge red flags. They knew.

 

A report from the Urban-Brookings Tax Policy Center said, “The new tax law will raise deficits and make the distribution of after-tax income more unequal.” The Penn Wharton Budget Model was more specific: “The Tax Cuts and Jobs Act of 2017 increases debt by between $1.9 trillion to $2.2 trillion over the next decade.”

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The Republicans went ahead and did this, even though the United States had been losing substantial revenue from tax breaks for the wealthy for years. A 2018 report from the Institute on Taxation and Economic Policy revealed that “since 2000, tax cuts had reduced federal revenue by trillions of dollars and disproportionately benefited well-off households.”

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The report continued, “From 2001 through 2018, significant federal tax changes have reduced revenue by $5.1 trillion, with nearly two-thirds of that flowing to the richest fifth of Americans. The cumulative impact on the deficit during this period is $5.9 trillion, including interest payments. By the end of 2025, the tally of tax cuts will grow to $10.6 trillion. Nearly $2 trillion of this amount will have gone to the richest 1 percent. By then, the total impact on the deficit will be $13.6 trillion, including interest payments.” The researchers also point out that their “analysis does not include hundreds of billions of dollars in so-called tax cut ‘extenders’ for corporations and other businesses that Congress has periodically enacted under each administration.”

 

Congressional Republicans and President Trump clearly knew in 2017 that their promises would not be kept. They just didn’t care. As usual, they just sold us out to lobbyists.

 

Corporations, trade associations and special interest groups spent $9.6 million to lobby Congress on issues related to taxes in the first three quarters of 2017 alone. But the fourth quarter said hold my beer.  In that one quarter alone, the National Association of Realtors spent $22.2 million, the Business Roundtable spent $17.3 million, and the U.S. Chamber of Commerce spent $16.8 million.

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Public Citizen, a nonprofit consumer rights advocacy group and think tank, found that “6,243 lobbyists were listed on lobbying disclosure forms as working on issues involving the word ‘tax’ through the first three quarters of 2017. That is equal to 57 percent of the nearly 11,000 people who have reported engaging in any domestic lobbying activities at all in 2017. Put another way, this equals more than 11 lobbyists for every member of Congress.”

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Obviously, when that many hands are in the cookie jar, the cookies are going to be badly crumbled. So, did corporations get their money’s worth from all this lobbying? You betcha!

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Poor Corporate America didn’t feel they got quite enough breaks in the 2017 tax bill, so they continued their lobbying efforts full blast even after it passed. And boy, did that work out for them! In fact, their lobbyists worked so hard that large companies got even more tax breaks in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Yes, you read that correctly.

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Big business – and wealthy Americans – got an additional $174 billion in tax relief in the initial economic rescue package. These breaks included increasing the amount of deductions companies could take on the interest of their debt, allowing net operating losses to reduce tax liabilities, and another slash in capital gains taxes (which could be applied retroactively, for up to two years! Yay!).

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And then there is this: Another New York Times analysis found that “through a series of obscure regulations, the U.S. Treasury carved out exceptions to [the CARES Act] that meant many leading American and foreign companies would owe little or nothing in new taxes on offshore profits, according to a review of the Treasury’s rules, government lobbying records, and interviews with federal policy-makers and tax experts. Companies were effectively let off the hook for tens if not hundreds of billions of taxes that they would have been required to pay… One of the most effective campaigns, with the greatest financial consequence, was led by a small group of large foreign banks, including Credit Suisse and Barclays.”

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So, let us get this straight. These banks didn’t like paying taxes for some odd reason, so Donald Trump’s then Treasury Secretary Steven Mnuchin unilaterally decided to exempt them from paying them?  Where can we sign up for that deal?

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The New York Times again: “Officials at the Joint Committee on Taxation have calculated that the exemptions for international banks could reduce (their tax burden) by up to $50 billion.”

 

Set aside for a moment that the U.S. Treasury in no way has the unilateral power to do something like this – making this whole move unconstitutional – but I wonder why was Steven Mnuchin so hell-bent on protecting foreign banks?

 

The answer to that question came on February 23, 2021, when The Washington Post revealed Steven Mnuchin was starting an investment fund with the intention of raising money from Persian Gulf sovereign wealth funds and other international sources. As a matter of fact, when the Capitol riots broke out on January 6th, Mnuchin was out of the country on a “diplomatic” trip to the Middle East and Africa – a trip paid for by American taxpayers – meeting with Egypt, Israel, Qatar, Sudan, the United Arab Emirates, and Saudi Arabia. 

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Just one day after leaving government, Mnuchin filed paperwork in Delaware to start his new firm. These guys have some nerve.