In the Tax Cuts and Jobs Act that passed last December, Donald TrumpDonald TrumpGrant Woods, longtime friend of McCain and former Arizona AG, dies at 67 Super PACs release ad campaign hitting Vance over past comments on Trump Glasgow summit raises stakes for Biden deal MORE and the Republican Congress doubled down on deficit spending, an unpopular move that they say will grow GDP and jobs.
While we can speculate endlessly about who will get a specific tax break next year, there is no debate over who will be the biggest beneficiary: corporations, which had their taxes reduced from 35 percent to 21 percent.
The majority of Americans know this. Consumer finance site WalletHub conducted a survey and found that fewer than four in 10 taxpayers are happy with the recent tax reform law.
A little more than two in three people (69 percent) said these reforms are better for corporations than consumers, and 67 percent indicated they benefit the rich more than the middle class. Additionally, nine in 10 respondents don’t think the current government spends their tax dollars wisely.
It is true that deficit spending can be stimulative and create jobs, but simply increasing corporate earnings by cutting their taxes is not the surest way to accomplish that. On the heels of the tax bill’s passage, some corporations — seizing on the positive value of public relations — announced small, one-time bonuses and wage increases.
Concurrently, many corporations have increased dividends and announced big share buybacks. Indeed, the last time the U.S. gave a big tax break to companies providing flexibility on repatriation, hoping to incentivize them to hire and invest, they spent it on dividends and buybacks.
To be clear, the beneficiary of these increasing dividends and stock buybacks are shareholders — meaning wealthy people — not hourly wage earners. If the objective of tax reform truly is to strengthen our economy and stimulate job growth, it needs to impact the 99 percent.
Studies show that the middle- and low-income classes, when presented with a tax stimulus, are more likely to spend it — putting it back into the U.S. economy in the form of groceries, automobiles, smartphones and travel. The reason is a no-brainer: It’s mad money, and they need the windfall more than wealthy people do.
In one of his first moves after being elected in 2009, President Barack ObamaBarack Hussein ObamaGlasgow summit raises stakes for Biden deal Obama gives fiery speech for McAuliffe: 'Don't sit this one out' Obama looks to give new momentum to McAuliffe MORE also pushed an economic agenda that involved significantly raising the deficit. When it happened back then, the Republican Congress went bonkers, but now? Not so much.
Obama did so to save an economy that was in its worst shape since the Great Depression. He stopped the bleeding, the markets stabilized and indeed rallied. Over his tenure, unemployment fell from more than 10 percent to below 5 percent.
Obviously, no one wants to pay taxes, and titans of industry are no different. In the WalletHub survey, more than one-third of Americans (37 percent) said they would move to a different country to secure a tax-free future.
Roughly One-quarter (24 percent) would get an IRS tattoo, 22 percent would switch political parties, and 15 percent would even be willing to take a vow of celibacy.
The thing is, if the Republicans in Congress were serious about creating jobs, they could find much better ways of doing so than taking an ax to corporate taxes. For instance, they could allot the $1.5 trillion hit to our national debt to much-needed initiatives that will improve our nation’s infrastructure.
Programs like these would put Americans to work and make sure our roads, bridges, waterways and other structures stay modern and safe for generations to come. Now that would be deficit spending with a cause — a good one.
Chad A. Leat is a retired vice chairman of Global Banking at Citigroup who has nearly 30 years of markets and banking experience on Wall Street. He is a consultant at Apollo Global Management, LLC, a private equity firm. Leat currently serves on the boards of Norwegian Cruise Lines, MidCap Financial, J.Crew Operating Corp., TPG Pace Holdings Corp. and TPG Pace Energy Holdings Corp.