What did corporate America do with its big tax cut? It spent over $800 billion on company shares last year, pushing stock buybacks to their highest level ever.
Close to home, Texas Instruments paid $5.1 billion to repurchase shares in 2018 — twice as much as the year before and more than any Texas company in the S&P 500.
TI’s effective tax rate dropped from 39% in 2017 to 17% last year, thanks to corporate tax cuts approved in late 2017 by Republican lawmakers and President Donald Trump.
The tax measure, which had broad support from American businesses, has been Trump’s signature legislative achievement. It prompted several large companies to hand out $1,000 bonuses to workers, and supporters said it would spur business investment, higher wages and a stronger economy.
“We haven’t seen the business expansion or increase in U.S. employment that many had hoped for, but companies are a lot more profitable,” said Howard Silverblatt, senior analyst for S&P Dow Jones Indices, which tracks buybacks and other metrics for the S&P 500.
For those 500 companies, which account for most of the stock market capitalization, the effective tax rate declined by almost 7 percentage points in 2018, he said. For S&P companies in information technology, including TI, Apple, Oracle and the like, the effective tax rate plunged by over 25 percentage points.
“That difference is pure cash,” Silverblatt said.
gavreaux on June 23rd, 2019 at 12:54 UTC »
I used to work for a guy who owned his business, was very successful, socially liberal, politically liberal. Very nice guy. I asked him straight up once, if you got a business tax cut, would you hire more people with the money? His answer was "no, I don't hire because of my tax rate, I hire because i have business needs to fill."
MarodRamby on June 23rd, 2019 at 11:43 UTC »
Companies want to buy stock and goose the stock price because senior executives derive so much of their compensation from the stock prices.
thesesforty-three on June 23rd, 2019 at 11:29 UTC »
A good description of the tax cuts: