BY STATE SENATOR JAMES SANDERS, JR.
President Donald Trump has often spoken about creating jobs or giving jobs back to the American people, but the tax cut plan he introduced last winter known as the Tax Cuts and Jobs Act is doing more to benefit corporations than middle class working people.
The reason is simple. Many of these businesses are using the revenue from the corporate tax rate reduction to purchase stock in their own companies. Rather than making employees a priority, hiring more people and giving them the salaries they deserve, they are demonstrating the corporate greed we know so well.
Engaging in “insider sales” is beneficial for CEOs because they can make the public think their company’s stock is valuable and get other investors to purchase it, which drives up profits. For example, when Mastercard announced that it planned to conduct a $4 billion buyback, it sold $44.4 million worth of stock in just one month. Some of the biggest companies using buybacks to boost the value of their own shares, include: FedEx, General Motors, Schlumberger Ltd., and Wells Fargo.
Instead of making stock buybacks a priority, corporate America should be making real and lasting investments in capital improvements, growing businesses, paying higher dividends, and updating worker training as well as increasing benefits and wages – because the fact is most of these buybacks are not creating new jobs or factories. Even though the value of retirement plans tend to increase when the stock market flourishes, the wealthy still reap most of the benefits. 1n 2016, for example, the top 10 percent of households owned 84 percent of all stocks, according to NYU professor Edward Wolff.
If companies like McDonald’s, Starbucks and Lowe’s used the money they spent on their own stock to benefit their workers instead, each employee could have received a bonus of up to $18,000. That is according to a recent study by the Roosevelt Institute, a group that aims to rethink and reshape local policy and federal legislation to create a more equitable economic system.
However, the Tax Cuts and Jobs Act did have some positive aspects. It simplified the filing of individual tax returns for millions of households by eliminating the need for people to itemize their deductions. It also nearly doubled the standard deduction, reduced income tax rates and reformed many other provisions. In doing so, it also reduced the amount of time it takes to complete an individual tax return by four to seven percent, according to the Tax Foundation.
When thinking about corporate stock buybacks, however, let us remember that this is not a new problem. It is systemic, and it has gone on for decades, but it is only getting worse under the Trump administration. We need to remind companies through our purchases and investments that we have power in shaping their sustainability and we will not stand for stock buybacks that line the pockets of CEOs instead of benefitting workers. We can also support legislation like the Reward Work Act introduced by Senator Tammy Baldwin of Wisconsin, which would ban stock buybacks done as open market repurchases.