WASHINGTON ― Corporations rewarded their shareholders with a record-setting $1 trillion in stock repurchases this year thanks partly to the Republican tax law.
But, unlike last year, when scores of major U.S. companies announced bonuses and raises for their workers following passage of the bill, few firms have announced similar plans heading into 2019.
The bonuses that companies announced were a major selling point for Republicans after they passed the Tax Cuts and Jobs Act in December 2017. House Majority Whip Steve Scalise kept a running tally of corporate press releases and news stories about bonuses that cumulatively reached something like 4 million workers.
Almost every day, Republicans were able to point to $1,000 bonus announcements by companies like Walmart, AT&T and Comcast, as well as news from other businesses that had raised wages or made longer-lasting investments, to counter Democratic characterizations and independent analyses that the law would mainly benefit large corporations and the rich.
But the tax law, which passed the House a year ago Thursday, has not become more popular, and, adjusted for inflation, worker pay has remained stagnant. Now it looks like the bonuses won’t be coming back.
HuffPost asked 20 of the top U.S. companies that gave out bonuses or raises to their employees last year as a result of the tax law whether they would be doing so again. None said they would, though most did not respond.
A Bank of America spokesman noted the company already handed out a second round of $1,000 bonuses to its employees in November, citing record profits after the tax cut law.
The insurance provider Aflac said that, although it had given its workers a $500 boost to their 401(k) retirement plans in 2017, it had also increased the amount it would pay into the retirement accounts with every future paycheck.
“So, rather than a one-time bump for our employees in the form of cash, we wanted to provide a long-term benefit that will demonstrate the company’s ongoing commitment,” Aflac spokesman Jon Sullivan said.
But the vast majority of the tax cut compensation changes that companies announced after the tax law passed Congress were for one-time bonuses, most of which apparently will not be repeated.
A Wells Fargo spokesman pointed to a December 2017 press release from the company announcing minimum-wage increases for their employees.
“We’ll continue to be one of the nation’s largest employers, hit our goals, and provide credit to millions of customers,” the spokesman said.
There may have been a policy reason for the flurry of bonus announcements last year and not this year. Since the law passed in December 2017, companies may have scrambled to announce extra compensation before the end of the year because doing so gave them a tax advantage. Companies deduct employee pay from their income for tax purposes, and in 2017 corporate income was still subject to a 35 percent rate. The tax law slashed the rate to 21 percent, so paying a bonus in 2017 meant companies could deduct the value against the higher rate.
“I think a lot of the year-end bonuses that were declared last year were because of the race to take that larger deduction,” Steven Rosenthal, a fellow at the independent Tax Policy Center, said in an interview.
Though workers would appreciate more cash directly in their hands, they would probably like raises better. That’s exactly why some Democrats, such as House Minority Leader Nancy Pelosi (D-Calif.), mocked bonus announcements last year as “crumbs,” a line that Republicans used unsuccessfully in hopes of saving their majority in the 2018 midterm elections.
“They actually should be doing raises, not bonuses. You do raises, then you’ve got to stay with it. You do bonuses, it’s ‘Thank you very much for the bonus,’ and that’s the end of it,” said Sen. Sherrod Brown (D-Ohio), a critic of the tax law who says it’s done little to accelerate job and wage growth. “I would assume they wouldn’t [give out more bonuses], but of course they should.”
White House economic adviser Kevin Hassett suggested Wednesday that he did not expect another bonus surge, since he attributed last year’s haul to the law’s one-time tax holiday on corporate overseas profits “repatriated” to the U.S.
“We expected there to be a one-time surge in bonuses associated with repatriation, and it’s come in pretty much about what we thought,” Hassett told reporters on a call.
Republican Sen. Rob Portman, Brown’s fellow senator from Ohio, agreed that companies should be giving more raises to their employees. A supporter of the tax cut law, Portman said he’s heard mostly positive effects after attending roundtable discussions with businesses across the state.
“I actually am not in a position to tell companies what to do,” Portman said. “But I’ve helped companies out that have provided... investments in people, meaning training... and increased wages ― not just bonuses. I think that’s even better.”