Thursday, November 30, 2017

Even corporations admit that tax cut won't help real people

While it's dizzying and exhausting to keep up with the latest GOP sleazy tax plan and figuring out where it stands in the Senate, there is one thing that's quite obvious. This tax cut isn't going to do a damn thing for Main Street.
Robert Bradway, chief executive of Amgen Inc., said in an Oct. 25 earnings call that the company has been “actively returning capital in the form of growing dividend and buyback and I’d expect us to continue that.” Executives including Coca-Cola CEO James Quincey, Pfizer Chief Financial Officer Frank D’Amelio and Cisco CFO Kelly Kramer have recently made similar statements.

“We’ll be able to get much more aggressive on the share buyback” after a tax cut, Kramer said in a Nov. 16 interview.

U.S. voters disapprove of the Republican tax legislation by a two-to-one margin, according to a Quinnipiac University poll released Nov. 15, and corporate promises to return any windfall to investors aren’t helping the White House sales effort. The Trump administration has appeared flummoxed. At a Nov. 14 speech to the Wall Street Journal CEO Council by Trump’s top economic adviser, Gary Cohn, the moderator asked business leaders in the audience for a show of hands if they planned to reinvest tax cut proceeds. Few people responded….

Trump has insisted that the Republican tax plan cut the U.S. corporate rate to 20 percent from 35 percent. Another provision would impose an even lower tax rate on companies’ stockpiled overseas earnings, giving them an incentive to return trillions of dollars in offshore cash to the U.S. That money is also unlikely to spur hiring because companies are already well-capitalized and can bring on as many employees as they need, said John Shin, a foreign-exchange strategist at Bank of America Merrill Lynch.

“Companies are sitting on large amounts of cash. They’re not really financially constrained,” Shin, who conducted a survey of more than 300 companies asking their plans for a tax overhaul, said in an interview. “They’re still working for their shareholders, primarily."
No kidding? Next you'll tell me that the 700 point runup in the Dow over the last 3 days isn't based on any kind of economic fundamentals, and is nothing more than gambling that this regressive giveaway will pass, blowing the stock market Bubble even higher.

I also noted this part from the updated GDP report for 3rd Quarter 2017. Not only was GDP growth for the Q3 2017 bumped higher, to 3.3% from 3.0%, but profits took a major leap.
Profits from current production (corporate profits with inventory valuation adjustment and capital consumption adjustment) increased $91.6 billion in the third quarter, compared with an increase of $14.4 billion in the second quarter.

Profits of domestic financial corporations increased $60.6 billion in the third quarter, in contrast to a decrease of $33.8 billion in the second quarter. Profits of domestic nonfinancial corporations increased $12.5 billion, compared with an increase of $59.1 billion. Rest-of-the-world profits increased $18.6 billion, in contrast to a decrease of $10.8 billion. In the third quarter, receipts increased $23.1 billion, and payments increased $4.6 billion.
In fact, post-tax corporate profits were up 7.7% in Q3 2017 compared to 1 year prior to that. So economic growth isn't a problem these days, and corporations are clearly far from burdened under our current taxation systems, as profits keep going up. Giving them a lower tax rate would increase that incentive to grab profit over paying workers (or adding workers), and then the CEOs dole out those excessive profits in the forms of dividends to shareholders.

And it's not like the typical American worker is doing well in late 2017 Average real hourly wages actually went down from June to September, and went down again in October. So if this absurd tax bill passes, inequality will grow as the stock market Bubble keeps blowing while wages continue to stagnate. At the same time, housing continues to be less affordable, and then this tax scam makes owning a house less worthwhile for the middle and working classes because it reduces the benefits of write-offs for mortgage interest and property taxes.

This is leading to two crash scenarios - 1 in the housing market which would mirror what we saw in the mid-to-late 2000s, combined with a stock market bubble that is eerily similar to what we had in the dot-com days of 2000 (one which quickly deflated, leading to recession in 2001).

We could choose to slow and reverse these destructive trends by raising taxes on the rich, possibly installing a wealth tax, and encouraging workers’ rights to raise the wages of the average American. We also could be expanding stabilizers like Social Security for workers between 55 and 67, and putting in Medicare for All, which not only is good social policy, but prevents consumer spending from going down the tubes if the GOP deforms Obamacare and causes premiums to go up.

Instead, the GOP’s Trump/Ryan tax plan seems determined to put this on steroids, hastening the crash and making it worse for the overwhelming majority of Americans. But then again, that just clears the way for Step two of this evil, Piece of Shit tax plan.

And no, any small boost in growth that might happen from this Tax Scam WON'T COME CLOSE to making up for the revenue that Uncle Sam will lose, and the Joint Committee on Taxation confirmed today that deficits will blow sky high.

And the GOP is still trying to blast this through, despite not having a complete picture of how this will affect our economy and fiscal picture, or even having actual text as to what tax provisions are or are not in the final bill.

It makes me wonder if there's a guillotine manufacturer that I cash out some of my current stock holdings into. Seems to be a good upside play if this Piece of Shit somehow goes through.

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