The House of Representatives is set to vote on the final version of the GOP tax bill Tuesday, with the Senate to follow close behind. Most Republican members of Congress are heralding the plan’s giant, permanent tax cut for corporations as the reason behind their support. The GOP argues that when corporations get a tax cut, they put that money toward creating more jobs and raising wages.
But history shows that just isn’t correct — and history may be about to repeat itself.
In an interview with CNN Money, Wells Fargo CEO Tim Sloan made it clear what he plans to do with the corporation’s tax windfall — and it doesn’t benefit the average American worker.
“Is it our goal to increase return to our shareholders and do we have an excess amount of capital? The answer to both is, yes,” Sloan told CNN Money. “So our expectation should be that we will continue to increase our dividend and our share buybacks next year and the year after that and the year after that.”
And it’s not just Wells Fargo that stands to benefit. Goldman Sachs could also see a tax break worth up to $6 billion dollars from the GOP tax bill.
The statement from Wells Fargo’s CEO confirms the suspicion that many observers had a few weeks ago, after White House chief economic adviser Gary Cohn attended an Wall Street Journal event where CEOs were asked whether their company plans to invest more if the tax reform bill passes.
Very few hands went up.
This surprised Cohn, who asked, “Why aren’t the other hands up?”
But it shouldn’t be all that surprising. The general consensus among economists is that cutting corporate taxes to spur economic growth — known as “trickle-down economics” — hardly worked in the 1980s economy and would surely fail in today’s modernized economy.
The economy President Donald Trump is operating in is rife with start-ups, meaning corporations are more likely to invest in research and automation to stay competitive or turn over their gains to their shareholders, two things that generally don’t promote job growth. Even one of President Ronald Reagan’s economic policy advisers who helped shape the Republican myth of trickle-down economics now says it doesn’t work, calling the GOP rhetoric around tax cuts “wishful thinking.”
The American public is catching on to the scam as well. A recent CNN poll from Tuesday found only 33 percent of Americans say they favor the GOP tax bill, while 55 percent oppose it. Sixty-six percent of Americans say they believe the bill favors the wealthy over the middle class.