Shocker: Democrats predictions about the GOP tax cut are coming true

[Yo_Mama_Been_Loggin]

When Republicans put together their tax bill last year, it was not much of a surprise to see that its centerpiece was a gigantic corporate tax cut, lowering the statutory corporate rate from 35 percent down to 21 percent. This cut accounted for about $1 trillion of the bill’s total $1.5 trillion cost, but Republicans said it really wasn’t about helping corporations at all.

No, the real target was the workers: Corporations would take the money and use it to create new jobs and raise the wages of those working for them, as trickle-down economics did its magical work.

Democrats, on the other hand, said it was a scam. They charged that workers would see only a fraction of the benefits, and instead corporations would use most of their windfall for things like stock buybacks, which increase share prices and benefit the wealthy people who own the vast majority of stocks.

And of course, most of the news media treated this argument in the standard he said/she said manner: Republicans say this, Democrats say that, and the truth lies in some secret location we may never actually reach.

Well, it has been only two months since President Trump signed the bill into law, and we’re already learning what anyone with any sense knew at the time: Everything Democrats predicted is turning out to be right. Let’s look at this report in the New York Times, which describes how stock buybacks are reaching record levels:

Almost 100 American corporations have trumpeted such plans in the past month. American companies have announced more than $178 billion in planned buybacks — the largest amount unveiled in a single quarter, according to Birinyi Associates, a market research firm.

Such purchases reduce a company’s total number of outstanding shares, giving each remaining share a slightly bigger piece of the profit pie.

Cisco said this month that in response to the tax package, it would bring back to the United States $67 billion of overseas cash, using $25 billion to finance additional share repurchases. Alphabet, the parent company of Google, authorized up to $8.6 billion in stock purchases. PepsiCo announced a fresh $15 billion in planned buybacks. Chip gear maker Applied Materials disclosed plans for a $6 billion program to buy shares. Late last month, home improvement retailer Lowe’s unveiled plans for $5 billion in purchases.

https://www.washingtonpost.com/blogs/plum-line/wp/2018/02/27/shocker-democrats-predictions-about-the-gop-tax-cut-are-coming-true/?utm_term=.3dde82005102&wpisrc=nl_rainbow&wpmm=1

[zipplewrath]

1. Used to be illegal

Until Reagan, this used to be illegal. It was seen as manipulation of the market, which in fact it is.

[hueymahl]

2. The reason they do this is because of taxes and self-interest

If they distribute the money as dividends, it gets taxed again at the shareholder level. If they just buy-back the stock, there is no tax and the stock price goes up (in theory) giving shareholders the same net value (again, in theory).

One solution is to create a tax on stock buy-backs to discourage this type of behavior. Fat chance while the R's are in charge.

[dixiegrrrrl]

3. So shares go up, without adding any underlying value to them

Shareholders are happy, management gets a bonus for hitting stock price goals, everybody is happy
about the good economy except the ones who get the same shit sandwich on the job.

[Igel]

5. But there are future shareholders.

As shareholders sell their stock in BigCorp Inc. if BigCorp Inc. buys back the stock they're no longer shareholders.

If they buy corporate debt issued as bonds, it's not voluntarily. Bonds can be subject to mandatory call-back.

(As for the underlying predictions, if $0.01 of corporate tax savings were used for anything but employees, the predictions would still have been true, and it's hard to see none of the tax savings not going to something other than employees. The other set of predictions didn't include the word "only" or "solely", so they're also true if $0.01 goes to employees, and it's hard to see that not happening. Both sides know how to make difficult-to-falsify predictions that'll be taken as true by their team even if they're panned as utterly false by the other team. I keep saying that defensive linguistics should be taught to 9th graders.)

[Gothmog]

4. Who is surprised by this?