Democrats Downplay Bonuses Employees Are Getting In Wake Of GOP Tax Law

They say corporations must make more long-term investments in their workers.

WASHINGTON ― Democrats welcome that corporations are passing onto employees some of the savings from the Republican tax bill enacted late last year, but they say the bonuses aren’t reason for a major celebration.

While ordinary Americans are set to reap immediate benefits, Democrats caution that the wealthy and corporations will fare much better off in the long run under the law.

“Listen, I think it’s great when companies want to give workers bonuses,” Sen. Claire McCaskill (D-Mo.) said Tuesday. “That doesn’t change the reality of the numbers. It’s a debt-inducing, make-rich-people-richer tax bill that in the long run is not going to be helpful to the vast majority of people in my state that are sitting around the kitchen table trying to figure out how [to] come out even at the end of the month.”

Sen. Claire McCaskill (D-Mo.).
Sen. Claire McCaskill (D-Mo.).

Dozens of companies ― including Wells Fargo, Comcast, AT&T, American Airlines, BB&T, U.S. Bancorp and Nationwide Mutual Insurance ― announced bonuses up to $2,000 for thousands of employees in response to the new law. Others, like Aflac and Visa, announced they would be hiking their 401k match program due to the law. A spokesman for Visa said the company is also exploring other “long-term, sustainable investments versus one-time actions.” 

Republicans argued the response from the business world is early evidence that their tax plan is, as promised by them, helping the middle class despite overwhelming criticism of the legislation from Democrats and significant opposition from the public in polls.

“The verdict is starting to come in,” Senate Majority Whip John Cornyn (R-Texas) said Tuesday. “Many folks are pleasantly surprised, that this is the first time Congress and Washington D.C. has done something to make their life better.”

Not every company is feeling so generous, however. Pharmaceutical giant Pfizer is shutting down its research efforts on new treatments for Alzheimer’s and Parkinson’s diseases less then a month after announcing a $10-billion share buyback for its investors. AT&T and Comcast paired their announcements of bonuses with moves to quietly lay off hundreds of workers. Moreover, analysts expect corporations to use the bulk of the money they parked offshore and now can return to the U.S. at reduced tax rates ― some $450 billion ― to reward their shareholders.

“These immediate one-off bonuses are just public relations window-dressing ploys to gain favor with the Trump Administration,” Gregg Polsky, a tax professor at the University of Georgia, said. 

On Tuesday, the Potomac Electric Power Company (PEPCO) became the latest company to announce benefits to consumers stemming from the GOP tax law. The public utility, which provides power to the greater Washington area, said it will lower electric bills for almost 300,000 ratepayers largely because the corporate tax rate was slashed from to 21 percent from 35 percent.

But it’s worth noting that PEPCO, which was acquired by Exelon Corp. in 2016, paid an effective tax rate of negative 27.9 from 2008 to 2015 partly because of various credits and refunds from the government, according to a report by the Institute on Taxation and Economic Policy. Many other corporations similarly pay less in taxes or nothing at all because of loopholes and special breaks they enjoy in the tax code. 

Democrats offered praise for companies who are sharing their tax savings with workers, but said only time will tell whether the largesse is fairly distributed in the future. Almost all of the tax cuts for individuals under the GOP tax law expire at the end of 2025, they noted.

“I think what they’re doing now is great,” Sen. Jon Tester (D-Mont.) said. “But we’re going to have to live with this baby for a long time, so we’ll see next year and the year after that.”

Sen. Chris Murphy (D-Conn.) called it a “good thing” that some corporations are rewarding workers with bonuses because of the tax law. He argued, however, that the positive aspects of the law are “greatly outweighed by the bad things” in it.

According to the nonpartisan Tax Policy Center, for example, the richest 20 percent of households reap 90 percent of the benefit of the tax cuts over a 10-year time period. 

As more workers see their paychecks rise, Democrats are going to have a tougher time explaining how their nonstop obstruction is helping the middle class. Michael Ahrens, Republican National Committee spokesman

Sen. Sherrod Brown (D-Ohio), while applauding companies that are giving out bonuses, added that such payments “are often a one-shot deal.”

“I think the issue is, look at the ratio of the money they’re spending now on their employees versus the amount for stock buybacks,” Brown said.

In addition to the bonuses, Republicans say Americans can expect to see more money in their paychecks this year as a result of the tax withholding changes under the new law. Touting the increase in take-home pay will be a big part of GOP efforts to improve the public’s opinion of the law ahead of the 2018 midterm elections.

That task may prove difficult. When Congress approved a tax cut for the middle class in 2009 under then-President Barack Obama’s stimulus package, just 12 percent of the American public noticed

Still, Republicans say Democrats will have to answer for their opposition to the tax law. 

“If it were up to Democrats, a million Americans wouldn’t have gotten a bonus or more take-home pay,” Republican National Committee spokesman Michael Ahrens said Tuesday. “As more workers see their paychecks rise, Democrats are going to have a tougher time explaining how their nonstop obstruction is helping the middle class.”