ICYMI: Arizona Mirror: Wage hikes promised by McSally, GOP, haven’t materialized, but stock buybacks have boomed
April 3, 2019
By Dan Neumann and Jim Small
Rather than invest in their workforce through new hiring and raising wages, a new report shows that U.S. corporations have bought back a record $1 trillion of their own stock in the 15 months since Republican members of Arizona’s congressional delegation cast votes for the GOP’s tax plan.
Arizona Republican Reps. Andy Biggs, Trent Franks, Paul Gosar, Martha McSally and David Schweikert all voted for the tax cuts. They were joined in the U.S. Senate by Jeff Flake and the late John McCain.
The total amount of announced buybacks since the tax law went into effect officially crossed the $1 trillion threshold last week, according to Americans for Tax Fairness, which advocates for progressive tax reform. In 2018, announced stock buybacks reached $910 billion, a huge increase over the previous record of $589 billion in 2007.
Stock buybacks are when a corporation purchases its own stock to inflate the value of each share, buoying the portfolio of investors. Half of U.S. households do not own any stock at all, and some economists say stock buybacks contribute to wage stagnation.
The report links the record buybacks with the GOP’s Tax Cuts and Jobs Act, which allowed corporations to keep more of their profits by slashing the tax rate from 35 to 21 percent. This meant the estimated effective tax rate on businesses fell to just 9 percent, well below the effective tax rate for households.
The Trump Administration sold the corporate tax cuts on the premise that the benefits would trickle down to lower- and middle-class households through job creation and higher wages. “More than 70 percent of this [tax cut] will be returned to workers,” White House Press Secretary Sarah Huckabee Sanders said when the law took effect.
McSally, who has since been appointed to the U.S. Senate, made a similar case at the time, explaining her position in an op-ed in The Arizona Republic.
“The Tax Cuts and Jobs Act also helps Arizonans by promoting a healthy economy that has more job opportunities with higher wages and benefits,” she wrote.
However, only 6 percent of corporate tax savings have been spent on raising workers’ wages. Instead, as some predicted, the windfall set off a buying spree of major corporations repurchasing millions of shares of their own stock.
Commercial banks, tech firms and pharmaceutical companies lead the list of the industries that have announced buybacks – including Apple with $100 billion in purchases planned, Wells Fargo with $40.6 billion, Cisco Systems with $40 billion, Qualcomm with $28.8 billion and Oracle with $24 billion.