The Trump #taxscam was supposed to create jobs by handing $1 trillion in cuts to multinational corporations and one percenters, who, we were promised, would put that money into R&D, business development, and other job-creating initiatives.
Instead, more than $800b of the windfall went to stock-buybacks, in which companies literally devour themselves to enrich their major shareholders.
Texas Instruments is a great case-study of how the #taxscam works: after the bill passed, TI's effective tax-rate fell from 39% to 17%, and the company celebrated by doubling its budget for buybacks, spending $5.1 billion on its own shares (more than any other Texas company). It added $51 million to its R&D budget, a budget that clocks in at one third the size of the buyback budget.
Though Texas Instruments has enough cash to squander billions on buybacks, it is still pleading poverty with local governments, demanding (and receiving) hundreds of millions in subsidies from local governments in exchange for deigning to manufacture its products there.
Many experts doubted that corporate tax cuts would result in big increases in R&D and capital expenses. That’s because many companies were already cash-rich. And with low interest rates, they could access cheap debt if they believed an investment was justified, said Steven Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center.“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.”
There are costs from cutting the corporate tax rate so sharply. Last year, federal taxes on corporate income fell by nearly $120 billion, a decline of 35%, according to the U.S. Bureau of Economic Analysis. That contributed to a rising deficit, even during a booming economy.
The annual shortfall, which was $442 billion in 2015, approached $800 billion last year. It’s projected to top $1 trillion by 2022.
Thanks, Uncle Sam! After tax cuts, Texas Instruments spent $5 billion on stock — three times more than R&D [Mitchell Schnurman/Dallas News]
(Image: Jacob Jose, CC-BY; Trump's Hair)
(via Late Stage Capitalism)
