Thursday, December 13, 2018

What we all knew to be true - fictional tax cuts and real job cuts

Quote of the Day: “the middle-class tax cut has disappeared from the political discussion.” - Judd Legum at

Of course, the minute Trump announced this piece of fiction, we all knew that it was going nowhere. And that is exactly where it went. Here are snippets from his post on the fictional tax cuts and real job cuts.

Verizon uses tax cut to pay for job cuts

Trump promised his big corporate tax cut, which passed in December 2017, would create a jobs boom. Corporate tax cuts will be “a job creator like we haven’t seen since Ronald Reagan,” Trump said.

That’s not how it worked out at Verizon.

On Tuesday, the company announced that 10,400 employees had “accepted voluntary buyouts,” reducing its workforce by 6.8%. How did Verizon pay for the buyouts? Trump’s tax cut.

Verizon said the buyouts “will result in a charge of as much as $2.1 billion, which will be offset by a $2.1 billion tax benefit in the fourth quarter.” Overall, Verizon will get a $4 billion tax cut in 2018.

Trump promised that, as a result of the tax cut, companies would bring jobs back from overseas. Verizon plans to replace some of its U.S. workers with 2500 to 5000 people working in India.

There is no evidence that the corporate tax cuts have accelerated job growth overall. In the 11 months since the corporate tax cuts became law, the economy has created 2.26 million jobs. That’s a slower pace than the last 11 months of Obama’s presidency, when 2.5 million jobs were created.

Trump’s vanishing $4,000 wage increase

The Trump administration also promised the corporate tax cut would immediately boost wages for workers. “I would expect to see an immediate jump in wage growth,” Kevin Hasslet, head of Trump’s Council of Economic Advisers, said in October 2017. Hasslet said the average household would see its wages increase by “$4,000 to $9,000 a year.”

But for nearly all workers, the wage hike never materialized. A study by Americans for Tax Fairness found that just 4.4% of workers got a wage increase or one-time bonus in the months after the corporate tax cut became law.

Overall, since the passage of the corporate tax cuts, real wages have been flat. For non-supervisory workers, wages have decreased slightly.

Trump’s vanishing middle-class tax cut

In the days leading up to the 2018 election, Trump promised a new tax cut aimed squarely at workers.

We’re going to be putting in a 10 percent tax cut for middle-income families. It’s going to be put in next week, 10 percent tax cut. Kevin Brady is working on it. We’ve been working on it for a few months, a 10 percent brand-new — and that is in addition to the big tax cuts that you’ve already gotten… This is for middle-income people, all middle-income people, a big tax, 10 percent. We’ll be putting it in next week.

Kevin Brady, the top Republican on the House Ways and Means Committee, was not working on it. Even before election day, Brady admitted a middle-class tax cut wasn’t going to happen in 2018.

A few days after the election, Trump’s top economic adviser, Larry Kudlow effectively declared the idea dead. He admitted the administration hadn’t even constructed a plan and said it was unlikely to materialize.

“We’ve been noodling more on this middle-class tax cut, how to structure it, and even pay for it. I don’t think the chances of that are very high, because the Democrats are going to go after the corporate tax and all that stuff,” Kudlow told Politico.

Since then, the middle-class tax cut has disappeared from the political discussion.

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