Most recently, from 2007 through 2016, stock repurchases by 461 companies on listed on the S&P 500 totaled $4 trillion, equal to 54 percent of profits. In addition, these companies declared $2.9 trillion in dividends, which were 39 percent of profits.
The deceptively named Tax Cut and Jobs Act slashes the corporate tax rate from 35 percent to 21 percent on the theory that companies will use the extra after-tax profits to make productive investments that will create jobs for Americans. Yet it is clear that instead of helping to rebuild the vanishing middle class, corporate executives will funnel the tax savings to already-rich shareholders through stock buybacks and cash dividends, increasing their take from the stock market. As a result, the nation’s rampantly unequal income distribution will only become worse.
For the Republican corporate tax cut to result in job creation, Congress must follow it up with legislation to rein in these distributions to shareholders.
Corporate executives are not being secretive about what they intend to do with the corporate tax breaks. With Trump’s chief economic adviser Gary Cohn on stage at the annual Wall Street Journal CEO Council last November, a moderator asked the room full of executives.