Even before Donald Trump signed the misguided U.S. tax-cut bill into law on Friday, a few major corporations were already sucking up to the Republican Congress and president — and preening for the American people. Wells Fargo, Comcast, Boeing and others said they would offer a share of their coming tax windfall to workers.
Such gestures on pay and bonuses are actually a good thing. But we should mention that some of the companies offering bonuses want regulatory kindness from the Trump administration or, like Boeing, are keen to win lucrative defense contracts. Then there is Wells Fargo, still repairing its public image damaged when line workers opened phony accounts under customers’ identities to win bonuses.
As hard as House Speaker Paul Ryan, Wells Fargo or Boeing might try, it’s going to be hard to show that the 2017 tax cut actually helps rank and file workers as much as the wealthy. Independent analysis shows it actually is kinder to corporations and the wealthy, especially over the long term.
But for Wells Fargo, raising the firm’s pay floor to $15 an hour is a two-fer. One, it gets points with the public. Two, it is probably a good business move for the San Francisco-based bank to keep its pay structure in line with local standards as a growing number of California cities are ratcheting up the minimum wage.
Though we’re skeptical of the tax-cut authors’ motives, we’re also realists. To make the best of it, more companies need to follow suit, add workers and raise pay. It’s fruitless to wait for the disproved “trickle-down” economic theory to show it has magical properties.
We’ll wait and see what companies, large and small, actually do with their tax cuts. To make a different firms need to go further than what Boeing and Wells Fargo and Comcast and others are pledging to do.
One reason is that the tax-cut bill undermines the health care insurance system. It specifically ends the Obamacare tax penalty for those who don’t carry health insurance, which means many modest earners who buy coverage on the private individual insurance markets today may stop buying it. As this thins out the insurance pool it will drive up costs for insurers stuck with only the sickest consumers in the Affordable Care Act insurance pools, and premiums will rise.
The tax cuts also balloon U.S. deficit spending by potentially $1.5 trillion over a decade. It is reasonable to worry that this lays the ground for cutting federal Medicaid subsidies sent to states to help defray health coverage for low-income families. It also creates incentives to cut Medicare, Social Security and other entitlement programs.
If businesses fail to pass on their windfalls and the tax cuts fail to provide middle-class prosperity, there will be a voter backlash. Stay tuned.