Let's start off by pointing out that the Republican so-called tax reform, that was supposed eliminate countless loopholes and deductions, succeeded only in eliminating a few individual income tax deductions and no corporate deductions. The eliminating of deductions was supposed to offset the reduction in corporate rates. Let's also point out the one-time repatriation of foreign funds rate reduction. It may have had the immediate effect of bringing some billions of dollars into the country and therefore subject to United States tax, but it did nothing to prevent the practice of "offshoring" cash from continuing. Trump and his Congressional toadies have been selling this as a middle-class tax cut and trumpeting supposed benefits to working Americans, but is it true?Starting with the actual tax rates and brackets, I did the math on this in another post a few weeks ago: http://tjpolitics.blogspot.com/2017/12/massivebelieve-me.html, so I won't replay my points, but basically some Americans will see modest decreases in federal taxes, while many, especially those with two or more children, will see increases. The elimination of individual deductions was supposedly offset by an almost doubling of the standard deduction, making it unnecessary for some married couples filing jointly to avoid the paperwork involved in itemizing. (A married couple filing jointly who had between $12,700 and $24,000 in deductions would see this simplification). But households itemizing more than $24,000 would lose some deductions. The almost doubling of the standard deduction doesn't look so good when you factor in the loss of the personal exemptions ($4050 per person). Even those seeing tax cuts aren't seeing that much of a tax cut.
Since Trump and his sycophants can't really brag about the increase in take-home pay, especially after Paul Ryan was caught tweeting about how great a $1.50/week bump was (my take home increased by $5.97/week) they have started crowing about the companies that have been paying bonuses and giving out raises. The main question that I have for the companies that have legitimately given out bonuses (the figure of $1000 per worker has been thrown around a lot) is how a tax cut that takes effect in the 2018 tax year, is causing companies to give out bonuses in 2017, since most of these bonuses were year-end 2017. How many were in the works before the tax bill? Of course, since this tax change benefited large businesses, it would be in their best interest to claim that the bonuses, as well as additional investment and hiring, were a direct result of the corporate tax cuts.
Aside from the tax cuts, what is the overall state of the economy? Pretty good...for big business. We've been on a positive trend since around 2010, in general we recovered fairly well from the recession. Demand for goods and services is up and unemployment is down. Trump's excision of many regulations is good news for the bottom line watchers in corporate towers. Businesses are making money. But I mentioned unemployment. While low unemployment is usually considered a positive, especially by those who are looking for work, it is not necessarily positive for employers. When unemployment is low the job seeker has the upper hand in the labor market. It becomes harder to find qualified employees. Companies have to raise wages in order to stay competitive. The company that I used to work for realized in 2014 that the reason their locations were understaffed wasn't incompetence on the part of their Human Resources Managers and Store Directors, or an insidious plot to keep labor costs in bonus territory, it was because, due to extremely low unemployment, the pay scale was not competitive. ( Human Resources Managers and Store Directors knew this a year earlier, but it's only a good idea when the big boys think of it). They raised their pay scales, not because they cared about their employees, or because they altruistically wanted to share their profits, but because that was how they were going to find and retain good employees. I can't believe that every other company in the country doesn't think the same way.
What about bonuses? Why are we hearing so much about bonuses and not more about pay increases? Bonuses are a one-time payout. They aren't "the gift that keeps on giving", like a pay increase. They look impressive. A $1000 per person bonus appears to have a bigger impact than a 50¢/hour raise, even though the raise will result in $1040, and will carry through to the next year...and the year after. A one-time bonus with no guarantee of future bonuses protects the company in the event that revenues decline. According to USA today, https://www.usatoday.com/story/money/2018/01/11/list-companies-paid-bonuses-boosted-pay-since-tax-bill-passed/1023848001/ "more than 125 employers" have announced plans for bonuses and pay increases". Not really a huge amount.
Factor in Trump's penchant for taking credit for all the positives and ignoring or blaming someone else for the negatives. While a lot of companies are paying out bonuses, some companies, sometimes the same companies are engaged in layoffs and plant closings. This article in Money & career Cheat Sheet lists some: https://www.cheatsheet.com/money-career/these-companies-started-firing-employees-right-after-getting-tax-cuts-from-trump.html/?a=viewall
Through all of this, it's evident that Trump does not understand the economy and what he does understand, he lies about. His happy dance about the stock market betrayed an abysmal ignorance http://tjpolitics.blogspot.com/2018/01/trump-and-stock-market.html and his recent tweet that "the stock market" was "wrong" when the Dow Jones Industrial average dropped several thousand points after supposed good news.
As the November elections get closer we're going to hear a lot about how well the economy is doing and how Trump's tax cuts are the reason.
Don't be fooled
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