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Companies Give Employees Bonuses Due To GOP Tax Bill—But It's Not As It Seems

Companies Give Employees Bonuses Due To GOP Tax Bill—But It's Not As It Seems
5 months ago

On Friday, December 22nd, President Donald Trump signed the GOP's long-awaited tax reform bill into law, securing small tax cuts for most Americans (at least for the time being) and gigantic tax cuts for the wealthiest Americans and businesses. Republicans claim that these tax cuts are what's best for the middle class due to "trickle down" economics - they believe that if companies are taxed less, they'll pass on those savings to the working class in the form of higher pay and more jobs. After the tax reform bill passed through congress, it seemed like companies were making good on this promise:

While bonuses for employees are definitely a good thing, there are a few things to keep in mind before declaring the GOP tax plan a success. The most obvious note is that many of the bonuses being doled out by companies are "one-time" bonuses, not permanent pay raises. If companies are truly serious about making a greater investment in their employees based on greater profits due to lowered taxes, they would make pay bumps permanent. 

Other companies are making a big deal about their decision to raise their minimum wage (certainly a good thing) but forget to mention they were on the track to doing so before the bill passed. Wells Fargo is based in California, where a $15 minimum wage has been passed into law and should be fully implemented by 2022. While it's true 2018 is getting in way ahead of that deadline, especially in Wells Fargo branches located in middle American states where the minimum wage can be as low as $7.25, a "tightening labor market" has been pulling pay rates upward for some time. Target announced they would have a $15 minimum wage by 2020 long before the passage of tax reform.

Perhaps most significantly, however, is the disproportion between these investments in employees and the amount of money businesses actually make off the bill. In 2016, AT&T paid $6.5 billion in taxes. Under the new tax plan, they're expected to pay around $2.4 billion less. AT&T's one-time bonuses (at $1,000 for 200,000 employees) will cost less than 1/10th of that. What happens to all that extra money? Time will tell whether it continues to be paid back to its employees or translated into profits for the wealthy entities that control these companies.

Many believe these bonuses and tax hikes, which are taking place before the tax bill has had the chance to make any real impact on the economy, are an attempt by these large corporations to buy support for the bill. By spending $2 million of their predicted savings, they're hoping the middle-class will be too pleased to notice that their "tax cut" is absolutely dwarfed by the billions of dollars saved by major corporations. To some, these bonuses are essentially a bribe, asking Americans, many in tough financial situations, to look the other way while the wealthy make off like bandits.

However, it's also possible these bonuses are, in fact, the first step companies are taking in a pattern of extended investment in their employees. Perhaps, contrary to history, this will be the instance where trickle down economics finally pays off. To find out whether this is the case, the next sign to look for will be major investments by companies in capital goods. The additional investments should be massive, corresponding to the huge tax cuts these corporations have been given.

H/T - Huffpost, CNN