Expert reveals trillions spent on stock buybacks post-Trump tax cuts

It resulted in significant corporate stock buybacks rather than investments in workers or innovation.

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Image Credit: AP Photo/Evan Vucci

An economic policy expert revealed to the Senate Budget Committee that large corporations funneled massive gains from the 2017 Trump-GOP tax law into stock buybacks, enriching executives and wealthy shareholders while neglecting worker pay. During a hearing titled “Making Wall Street Pay Its Fair Share: Raising Revenue, Strengthening Our Economy,” Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies, expressed outrage at how corporations used their tax windfalls.

“Whether you were for or against the 2017 tax cuts, I think we should all be angry that corporations took their tax windfalls and spent a trillion dollars of it in 2018 on stock buybacks instead of on worker wages or innovation,” Anderson testified.

The 2017 Trump-GOP tax law, officially known as the Tax Cuts and Jobs Act, promised job creation, wage increases, and economic growth. Instead, it resulted in significant corporate stock buybacks rather than investments in workers or innovation. The Institute on Taxation and Economic Policy (ITEP) noted that during the first four years after the tax cuts took effect, the largest U.S. corporations collectively spent $2.72 trillion repurchasing their own shares, outpacing investments in plants, equipment, or software that could have created new jobs and stimulated economic growth.

In her written testimony, Anderson highlighted data from the Congressional Research Service, showing that U.S. corporations spent $1 trillion on stock buybacks in the first year of the Tax Cuts and Jobs Act. S&P 500 firms alone spent $806 billion on buybacks, a significant increase from the $519 billion spent in 2017. Anderson emphasized that this diversion of resources from worker wages and research and development (R&D) to stock buybacks stifles long-term growth and innovation.

John Deere exemplifies this trend, having spent $12.2 billion on stock buybacks over the past two years while cutting hundreds of jobs and offshoring production. Labor Institute executive director Les Leopold criticized the practice as “a blatant form of stock manipulation that was illegal until deregulated by the Reagan administration.”

The hearing coincided with reports that congressional Republicans are planning further tax cuts for the rich and large corporations if they regain control of the Senate and the White House in the upcoming elections. Anderson urged senators to seize the opportunity presented by the looming expiration of some provisions of the 2017 tax law to implement reforms targeting corporations that excessively pay their CEOs, tax Wall Street speculation, and discourage stock buybacks.

Anderson’s written testimony proposed increasing the 1% excise tax on corporate stock buybacks to 4%, which would generate $238 billion in new federal revenue over the next decade. She argued that Wall Street lobbyists have disproportionately influenced the tax code, allowing the financial sector to pay less than its fair share for public services and infrastructure essential for a healthy economy.

During the hearing, Anderson stressed the urgency of these reforms. “Continuing the status quo—or returning to the pre-2017 tax code—will not be acceptable if we are to meet the public investment needs of our time and reverse our country’s staggering economic and racial disparities,” she wrote.

Senator Bernie Sanders and other progressive lawmakers echoed Anderson’s concerns, calling for immediate action to ensure corporations contribute their fair share. Sanders emphasized that the misuse of tax cuts for stock buybacks highlights the need for comprehensive tax reform to benefit all Americans, not just the wealthy.

The broader implications of the 2017 tax cuts are evident in the growing income inequality and stagnant wage growth for workers. By prioritizing shareholder returns over worker benefits and innovation, corporations have exacerbated economic disparities. Redirecting corporate profits to public investments and worker wages could stimulate economic growth and reduce income inequality.

The role of Wall Street lobbyists in shaping tax policy cannot be overlooked. Their influence has allowed the financial sector to evade fair taxation, depriving the government of revenue needed for essential services and infrastructure.

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Alexis Sterling is a seasoned War and Human Rights Reporter with a passion for reporting the truth in some of the world's most tumultuous regions. With a background in journalism and a keen interest in international affairs, Alexis's reporting is grounded in a commitment to human rights and a deep understanding of the complexities of global conflicts. Her work seeks to give voice to the voiceless and bring to light the human stories behind the headlines. Alexis is dedicated to responsible and engaged journalism, constantly striving to inform and educate the public on critical issues of war and human rights across the globe.

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