The Judas Kiss

Wells Fargo CEO reveals the scam at the heart of Republicans’ tax bill
Rebekah Entralgo, Think Progress
Dec 19, 2017

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.”

“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.”
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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.

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.

CEOs Aren’t Waiting for the Tax Bill to Pass — They’ve Already Started Pocketing the Windfall
by David Dayen, The Intercept
2017-12-18

U.S. corporations are already beginning the process of pocketing the winnings from the tax bill jackpot they expect to hit any day now, undercutting, in a remarkably public fashion, the pretense that the corporate tax cut will lead to greater investment in job creation.

Since the Senate passed its version of the tax bill on December 2, 29 companies have announced $70.2 billion in stock buybacks, a maneuver that uses company cash to buy its own shares, which then drives up the price of those shares, rewarding major investors and executives whose compensation is directly tied to the company’s stock price.

The figure comes from a new report by Senate Democrats, which relies on the public statements of company executives. Stock buybacks, meanwhile, had been declining. There were $120 billion in buybacks in the entire second quarter of 2017, among all companies. The new figure — $70.2 billion in just 10 days, from just 29 companies — suggests that a surge of buybacks is in the offing if the tax bill becomes official, representing a staggering transfer of wealth from taxpayers straight to the wealthy.

As part of the tax bill, corporations will be able to bring back trillions of dollars parked overseas at a much lower tax rate than current law. Companies also benefit from a slashing of the corporate tax rate from 35 percent to 21 percent and the elimination of the corporate “alternative minimum tax,” which enables the use of as many deductions as possible to hold onto earnings.

Republicans insist that the trillions of dollars headed back to corporations will get funneled into investments, job creation, and wage growth, a recitation of the theory of trickle-down economics.
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The companies announcing buybacks include some of the biggest in the world, like Home Depot, Oracle, Honeywell, Bank of America, Anthem, Boeing, MasterCard, and United Airlines. All of the announcements have come since December 5.

“Corporate CEOs have made clear that the massive tax giveaways in the Republican plan will not be passed on to workers but to rich investors — including the wealthy foreign investors who own about a third of the shares in American companies,” said Sen. Elizabeth Warren, D-Mass., in a statement accompanying the Senate Democrats’ report. “This plan will do nothing to stimulate the economy or raise wages — but it sure will make a bunch of rich guys a lot richer.”

The case of Oracle in particular is instructive. The software maker had $52 billion stashed overseas as of the end of 2016, the fifth most of any U.S. company, according to Moody’s Investors Service. Under the tax bill, that money would come back to the U.S. at a dramatically reduced tax rate. On December 14, the company announced a $12 billion buyback, with investors enjoying the benefits of the repatriated funds. Oracle co-founder Larry Ellison will receive an estimated $103.7 million in stock over the next five years, which actually represented a drop from his previous stock awards. With the buybacks, Ellison’s stock holdings will jump in value.

In 2004, President George W. Bush gave companies like Oracle a “repatriation tax holiday.” Hundreds of companies returned $312 billion in overseas earnings to the U.S. at a 5.25 percent tax rate. The Congressional Research Service cited one study showing that 91 percent of that money went to stock buybacks. Stock buybacks, as a result, jumped by 84 percent, according to a Goldman Sachs analysis.

The spectacle of companies announcing buybacks before the ink dries on the GOP tax bill ends all debate, if there was any left, on whether the tax cuts will lead to more jobs and better wages, or mass shareholder enrichment.

GOP Tax Plan Would Give 15 of America’s Largest Corporations a $236B Tax Cut
by Jake Johnson, Common Dreams
Monday, December 18, 2017

In “further proof that the Republican tax bill is a massive giveaway to the largest corporations in the country,” a new report (pdf) prepared for Sen. Bernie Sanders (I-Vt.) and published on Monday found that 15 of America’s most profitable corporations would receive a combined $236 billion tax cut if the GOP plan becomes law.

Released as Republicans gear up for a final vote on their tax bill as early as Tuesday, the report notes that “[o]ver the last 30 years, 15 of the largest U.S. corporations have accepted $3.9 trillion of corporate welfare in the form of subsidies, tax credits, and bailouts, and another $108 billion in government handouts in the form of federal contracts.”

“On top of this $4 trillion boondoggle,” the analysis adds, “Republicans want to give these corporations an additional $236 billion tax cut.”

Among the companies the report highlights are Apple, Pfizer, and Walmart, all of which utilize fancy “accounting tricks to dodge taxes” while also taking advantage of government programs that add to their bottomlines at the expense of American taxpayers.

The report goes on to observe that far from living up to its lofty goal of discouraging outsourcing, the deeply unpopular GOP tax bill actually “encourages companies to shift their jobs and profits overseas by moving to a ‘territorial’ tax system that would exempt future offshore profits of U.S. subsidiaries from taxation.”

While these companies stand to benefit massively from the GOP’s bill, “more than half of middle class families will pay more in taxes at the end of ten years,” Sanders said in a statement.

“Further, by running up a $1.4 trillion deficit, the Republicans are paving the way for massive cuts to Social Security, Medicare, and Medicaid,” Sanders concluded. “This is a tax bill written for wealthy Republican campaign contributors, not for the average American. It must be defeated.”

Sanders’ report coincides with an analysis (pdf) released Monday by the nonpartisan Tax Policy Center, which found that over 82 percent of the GOP bill’s benefits would go to the top one percent of Americans and nearly 60 percent would go to the top 0.1 percent by 2027.