The recent wave of businesses announcing bonuses for their employees “because of the upcoming Trump tax cuts” have many people singing the praises of “free market” or “supply side” economics.
Don’t be deceived.
The plain truth is that those are just other names for “trickle down” economics. And “trickle down” just doesn’t work for the middle class. It only works for corporations and the wealthy. Listen, we’ve tried it 3x with the Reagan tax cuts, the Clinton tax cuts and the Bush tax cuts.
For those of us in the 99%, do you recall getting rich with those cuts?
So, it “ain’t” going to happen again either! Only the wealthy and the companies will benefit.
Now, let’s address the issue of these bonuses that all these companies have announced. For most of the companies, the bonuses announced have been $1000 bonuses for every employee. Don’t get me wrong, many of us do appreciate the $1000 bonus. And we should. But let’s put it in the right context.
First of all, we were supposed to benefit from this by a factor of 4, according to the White House. (see here).
Second, a one-time bonus of $1000 is nowhere near the same as a pay raise of $4000. The one-time bonus does nothing to raise your base pay. If nothing changes your annual raise (if you even get one) will still be based off of the amount you made prior to receiving the bonus. Whereas, with the $4000 pay raise, that would be elevated your base for the rest of your career.
Thirdly, a lot of the companies doing this are simply trying to curry favor with the President since so many of them had come under fire from him before. By doing these token raises they are hoping for some benefit to come back to them (not you) later! For example, AT&T announced that they would be giving $1000 bonuses but what they are hoping for is a more favorable ruling from the Justice Department to allow them to buy Time Warner. The deal was blocked earlier last year by the DOJ. As another example consider Wells Fargo who, as many of you recall, was reeling from scandals last year in all the fake accounts.
Fourthly, look at the big picture of each of these companies. Walmart went ahead and announced that they were giving out some benefit to their employees and then promptly (and quietly) decided to shut down 63 Sam’s Clubs around the country costing thousands of jobs. Net net, the money they are paying out in their bonus does not come close to equaling the people they are putting out on the street!
Finally, if you think the typical $1000 bonus is generous let’s look at some rough, simple math. The old tax rate was 35% and the new tax rate is 20%. So, the companies are saving 15% in taxes. If we look at AT&T, their operating income in 2016 was about $20 billion. So 15% of that would be $3 billion of tax savings. If they give half of that savings to the employees that would be $1.5 billion divided by 250,000 employees which translates to $6000 per employee.
$6000 is what you should be getting. Instead, you are getting $1000. Does that sound fair?
So, they are only giving a fraction of their windfall to you and keeping the rest for themselves!
In conclusion, most of these announcements are PR stunts. Don’t be fooled! The only way that this works better is if the corporations will raise the wages of their employees to ensure a living wage and share a significant portion of the savings with the people who are helping them succeed (~50%-80%+ sounds more fair to me!)