Impacts of Trump Tax Cuts

Impacts of Trump Tax Cuts


Today’s (8/13/18) New York Times has an excellent piece on the impacts to date of the Trump corporate tax cuts: share buy backs leading to higher stock prices for investors, no increases in spending on plant and equipment, no increase in worker’s real wages and a very large increase in the national debt. The tragedy is enacting these cuts without simultaneously increasing the nation’s economic productivity and thereby potentially doing long-term damage to the economy.

The Times article depicts many large multi-nationals, like Facebook, Union Pacific, Apple and Amgen, responding to the tax cuts by buying back their corporate stock. This simply inflates the stock price to the benefit of shareholders, including many in top corporate management. It does nothing to grow the economy.

The sponsors of the legislation promised that corporations would respond to the tax cuts by investing in new plant and equipment, boosting the economy, boosting productivity and setting off a cycle of virtuous economic growth. Instead it has been pretty flat – the opposite of what Republicans in Congress promised their constituents. Productivity, which is the key to sustainable economic growth, has been nearly flat – 0.4% in the first quarter.

Real wages are flat or declining in the wake of the tax cuts. Real wages are wages and wage increases adjusted for inflation. Real wages have fallen because inflation in the costs of good and services exceeded the 2.7% increase in wages. In other words your paycheck is buying less because the prices of gas and medicines and other staples of every day life increased more than your pay. Real wages were increasing quite nicely in the two years prior to Trump’s taking office and then pushing through his tax cuts.

Trump tariffs (taxes) on steel and aluminum and Chinese manufactured goods are going to contribute an added dollop of inflation to curtail consumer spending powers, and the retaliatory foreign tariffs are already hurting American agricultural producers.

The Trump Administration said the tax cuts would spur economic growth such that they would pay for themselves. That has not happened; instead the federal budget deficit has ballooned. It increased by nearly 40% to $900 billion annually. The federal government will spend 5% more this year due primarily to the increase in military spending and corporate taxes will contribute 27% less to the common good and self defense of our nation.

Maybe Trump’s tax policies will improve the American economy in the future; to date it looks as if they are just a drag on our nation’s otherwise robust economic growth.


Prepared by: Lucien Wulsin

Dated: 8/13/18




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