Will a corporate tax cut lift worker pay? A union wants it in writing


Susan Walsh /AP

President Donald Trump gives a thumbs up at the U.S. Capitol on Thursday, Nov. 16, 2017. House Republicans Thursday to approve a near $1.5 trillion tax overhaul as the party prepared to drive the measure through the House. Across the Capitol, Democrats pointed to new numbers showing the Senate version of the plan would boost taxes on lower and middle-income Americans.

Sat, Nov 25, 2017 (2 a.m.)

WASHINGTON — At the heart of the Republican tax plan hurtling through Congress is an implicit promise that cutting corporate taxes will lift the middle class through higher wages and more jobs.

House Speaker Paul Ryan, for example, said in a recent speech that “fixing the business side of our tax code is really all about helping families and workers,” adding that “cutting the corporate tax rate means more jobs here in the United States. It will foster increased competition, which will directly drive up wages for our workers.”

Yet few U.S. companies have offered specific plans that support those promises. While many chief executives broadly praise Republicans’ efforts to cut taxes, few have detailed how they would deploy the savings from a corporate tax cut or put more money back in workers’ pockets.

The lack of pledges to create jobs has not been lost on President Donald Trump’s top economic adviser, Gary D. Cohn, who seemed perplexed last week about the lack of corporate enthusiasm for a tax cut.

At a Wall Street Journal conference, Cohn asked his audience of chief executives how many of them would invest more if the tax cut were passed. When only a few attendees raised their hands, Cohn asked: “Why aren’t the other hands up?”

Labor groups are wondering the same thing — and are seizing on the administration’s economic analysis that the tax cut will translate into an extra $4,000 in take-home pay for workers.

This week, the Communications Workers of America asked several companies that employ its members to promise to give workers a pay increase if the cut in the corporate tax rate goes through. The request, while unlikely to be heeded, highlights a critical question over who would benefit the most from the tax bill: shareholders or workers?

“President Trump and the Republican Congress have been trying to sell this corporate tax cut to working families by making big claims about wage increases, investment and job growth that don’t seem to be supported by the evidence,” said Chris Shelton, president of the union. “We’re going straight to the people who know how corporations plan to spend the billions of dollars being handed over to them — the CEOs — and asking them if they intend to keep the promises that Trump is making on their behalf.”

Business leaders and their lobbying groups, including the Business Roundtable and the U.S. Chamber of Commerce, say the tax bill will increase economic growth, profits and worker pay. Four out of five executives in a survey by the roundtable earlier this year said they would increase capital spending if Congress were to pass a tax package, while 3 in 4 said they would increase hiring.

Jamie Dimon, chairman and chief executive of JPMorgan Chase and chairman of the Business Roundtable, told the Economic Club of Chicago this week that if Congress had already passed a tax overhaul bill, “some companies would have made huge investments.”

“We know one thing for sure: Investments drive productivity, drives jobs and wages,” he added.

Trump has put a number on it, saying a typical American would see a $4,000 raise if the corporate rate was reduced to 20 percent from a high of 35 percent today, as both the House-passed bill and the pending Senate version propose. His Council of Economic Advisers says the increase could go as high as $9,000 for the average household.

Trump’s top economist, Kevin Hassett, chairman of the Council of Economic Advisers, said last week that he expected corporations to invest heavily and raise workers’ wages if the tax bill became law. When most developed nations have cut their corporate tax rate, he said, the resulting wage increases were “well north” of $4,000 per year for workers.

But Democrats and liberal economists dispute those claims, citing research that suggests that the bulk of the benefits from corporate cuts will flow to the rich, partly through companies’ buying back stock or increasing dividend payments to shareholders.

A prominent survey of top economists from across the ideological spectrum — the IGM Economic Experts Panel — found this week that almost no economists agreed with the notion that the size of the U.S. economy “will be substantially higher a decade from now than under the status quo” if the tax bill passed.

In a letter sent this week to the top executives of Verizon, AT&T and six other companies, the communications union asked them to pledge a $4,000 annual pay increase for employees for every year that the corporate rate rests at 20 percent. The union, which has called the tax measure “an outrageous money grab” and urged lawmakers to reject it, also asked the companies to say that they will not take advantage of other changes in the corporate code to send U.S. jobs to other countries.

The companies largely declined to comment or dismissed the letter as a stunt.

Jim Gerace, chief communications officer for Verizon, said that the company would take up the wage issue with the union when contract negotiations begin in 2019, “regardless of the outcome of tax reform legislation,” and that “it’s just too early to speak to the impacts on our business” from the tax bill.

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