GOP Tax Scam-- Just More Failed Trickle Down

The GOP thought that at least they'd have one "achievement" to run on in the midterms-- the massive taxcut. But the tax cut-- which many call "the tax scam"-- has turned out to not be that popular, not popular enough to run on. Over the weekend, the NY Times reported that Republicans aren't barging about and aren't even bragging about the continuation of the Obama economic expansion Trump takes credit for. "Republicans have reason to doubt the efficacy of an economic message in hotly contested midterm campaigns, which have historically been referendums on the sitting president. The last time the economy grew 4 percent in a quarter was in the middle of 2014, under President Barack Obama, just before Senate Democrats lost nine seats-- and their majority-- that fall... For their part, Democrats are weaponizing the tax law-- which is mired in only middling popularity-- against Republican opponents in some key races. Their critiques have been fed by government statistics showing that wages for typical American workers have not risen over the past year, after adjusting for inflation, even though Republicans promised the tax cuts would unleash rapid wage growth."

Polling has shown that voters are skeptical of the tax cut. Six months after its passage only 34% of voters approved-- a 6 point decline from the previous month. Patrick Murray, director of the independent Monmouth University Polling Institute said that "Public opinion on the Republican lawmakers’ signature accomplishment has never been positive, but potentially growing uncertainty about how American taxpayers will be affected does not seem to be helping the GOP’s prospects for November."

So where's the beef dough? Early yesterday morning Politico reported that it's been gobbled up the kinds of stock buy backs that make CEOs and corporate executives very rich.

Yesterday, I spent a couple of hours being interviewed for a book. It brought me back to thinking about long-forgotten incidents in my life in corporate America. I had to recall an incident when I was arguing about freedom of expression with 4 of Time-Warners highest ranking executives-- the kinds of guys who got millions of dollars in stock options annually. These are people whose net worth went up and down based on rises and drops in the company stock. And a record I had been executive producer on, "Cop Killer" by Ice-T's Body Count was causing the stock to go down-- a lot. I was arguing about freedom of expression. They were arguing about their personal wealth. At one point they rose from the table as one and walked out of the room snarling, sure they would never see me again. (At the time I was an obscure employee at Sire Records, someone whose name they didn't know and would never have to know. When they saw me next I had just been named president of Reprise and they walked into a party and saw me, thought about it in their hive brain and nearly fainted.)



Anyway, the gist of the Politico feature was that the biggest winners from Señor Trumpanzee’s new tax law "are corporate executives who have reaped gains as their companies buy back a record amount of stock, a practice that rewards shareholders by boosting the value of existing shares." These executives "have been profiting handsomely by selling shares since Trump signed the law on Dec. 22 and slashed corporate tax rates to 21 percent. That trend is likely to increase as Wall Street analysts expect buyback activity to accelerate in the coming weeks."

“It is going to be a parade of eye-popping numbers,” said Pat McGurn, the head of strategic research and analysis at Institutional Shareholder Services, a shareholder advisory firm.

That could undercut the political messaging value of the tax cuts in the Republican campaign to maintain control of Congress in the midterm elections.

Since the tax cuts were enacted, Oracle Corp. CEO Safra Catz sold $250 million worth of shares in her company-- the largest executive payday this year. Product development head Thomas Kurian sold $85 million. The sales came after the company announced a $12 billion share repurchase.

Mastercard CEO Ajay Banga sold $44.4 million of stock in May, the largest single cash-out by an executive of the company in at least 10 years, months after the company announced a $4 billion buyback of its own stock.

Two days after Eastman Chemical announced it would purchase $2 billion of its own stock, CEO Mark Costa sold 55,000 shares for $5.4 million.

The SEC requires company executives to disclose share purchases or sales within two business days. Companies emphasize that their executives’ share sales are often scheduled at regular intervals well in advance. In Banga’s case, he has routinely sold shares once a year, and always in May, since 2013.

Yet the insider sales feed the narrative that corporate tax cuts enrich executives in the short term while yielding less clear long-term benefits for workers and the broader economy. Critics of insider sales argue that they diminish the value of paying C-suite employees in shares-- a practice that’s intended to give them a greater stake in the long-term health of the company-- and can even raise questions about the motivation for the buybacks themselves.

Following the tax cuts, roughly 28 percent of companies in the S&P 500 mentioned plans to return some of their tax savings to shareholders, according to Morgan Stanley. Public companies announced more than $600 billion in buybacks in the first half of this year-- already toppling the previous annual record.

Year to date, buybacks have doubled from the same period a year ago, Merrill Lynch said in a July 24 report, citing its clients’ trading activity. “Last week we noted that buyback activity [was] poised to accelerate over the next six weeks, and indeed, corporate clients’ buybacks picked up to a two-month high and the 6th-highest level in our data history,” the company said.

The correlation between corporate buybacks and insider sales is clear, according to SEC Commissioner Robert Jackson, a Democrat. He studied 385 buybacks since the beginning of 2017 and found that after half of them, at least one executive sold shares within the next month.

The link between the tax cuts and big executive payouts, fueled by buybacks, is also plain, according to one institutional research firm.

“Stock buyback announcements in the U.S. have swelled to the highest levels on record in the wake of last year’s corporate tax cut,” said TrimTabs Investment Research in a July 10 report. “Corporate America’s actions suggest that most of the benefits of the corporate tax cut will flow to investors in general and top corporate executives in particular.”

And as the Washington Post pointed out yesterday, "since Paul Ryan joined Congress in 1999, the budget will have gone from a $125 billion surplus to a $1.1 trillion deficit." But... maybe some of these rich executives getting much richer are hiring butlers or buying more private planes and yachts and a little of that money is trickling down to working folks. Maybe. But a blue collar friend of mine who just moved to L.A. can't find a job. And he's been looking really hard and is pretty much willing to do anything. Trickle down has never worked and it's not working now.

Ellen Lipton, is running for an open seat in a suburban Michigan district north of Detroit. Today she pointed out that "For decades, Republicans have been running on the same message-- that massive tax cuts to billionaires and huge corporations will spur economic growth and make everyone better off. One reason I'm running for Congress in Michigan's 9th district is because voters here know that's not true, and that we can't afford to keep giving massive tax breaks to the top 1% while working people in this country continue to suffer. If Republicans in Congress could find over a trillion dollars to give tax breaks to their rich donors, we can absolutely make universal health care a reality in this country. Americans are sick and tired of hearing that there's no money for free college, no money for infrastructure, no money for a living wage. We know trickle-down doesn't work, and that it's time to stop putting the needs of political donors ahead of everyone else."

Progressive Democrat Lisa Brown was the chancellor of Washington State University in Spokane and an economist herself. She pointed out that despite the terrible numbers, her opponent, Rep. Cathy McMorris Rodgers "continues to deliver the DC talking points in eastern Washington to avoid talking about what’s really coming down-- which is the fallout of the ill-conceived tariffs and trade war on farms, ranches, businesses, and consumers. Tariffs are taxes. Worth repeating-- tariffs are taxes, ultimately paid in lost markets and revenue for farms and businesses  and higher prices for everyone. The administration has imposed billions of dollars of tariffs on imports and friends and foes alike are in retaliation imposing billions on U.S. exports. Republicans in the House are 'expressing disappointment' and then pivoting to their talking points while this disaster continues to unfold."

J.D. Scholten is giving Iowa racist Steve King a real race for his money, Yesterday he told me that "Trump and Speaker Ryan said the average American worker would see an extra $4,000-9,000 a year from this bill. So far, the average American worker has seen an additional $323, according to an Employment Situation report from the Bureau of Labor Statistics. In IA-04, we haven't seen any job growth. Our district is shrinking. As much as we produce corn, hogs and wind energy, the best thing we produce is our children. This Tax Bill doesn't do a damn thing for this district long term and it doesn't help us create a modern economy that allows us to keep our high school and college graduates in our district."

Matt Haggman is running for the open Miami-Dade seat that Ileana Ros-Lehtinen is retiring from, the bluest Republican-held district in the country. Trump only took 38.9% of the vote in 2016. Matt told us that "we know America is the strongest when its middle class is in good shape and we also know that trickle-down economics only benefits the wealthiest in this country. Trickle-down economics has never worked in this country and it never will. It’s time that as a country we get smarter about changing the economic landscape and start preparing our workforce for a 21st century economy. Too many families today are working twice as hard for less and we don’t tackle this issue now it will likely get much worse soon. The GOP tax reform passed in late 2017 was not only a scam that lied and manipulated lower and middle-class Americans, but it gave the wealthiest 1% breaks that they don’t need. The tax cuts that should have been made should’ve gone towards middle class families. It should have also made sure corporations and the wealthiest 1% are paying their fair share of taxes-- which as of today is not the case. I believe that everyone who is willing to work hard and play by the rules deserves a fair shot at the American Dream. It is clear though, after their horrendous Tax plan, we see the GOPs mentality is more towards the ‘kick them while they’re down’ approach."