DawgTalkers.net Forums DawgTalk Palus Politicus So What are companies doing with all that extra cash from the Tax Cuts

Corporate America threw Wall Street a record-shattering party last quarter.

Flooded with cash from the Republican tax cut, US public companies announced a whopping $436.6 billion worth of stock buybacks, according to research firm TrimTabs.




Not only is that most ever, it nearly doubles the previous record of $242.1 billion, which was set during the first three months of the year.

Apple alone announced plans for $100 billion in buybacks. Big banks such as Wells Fargo (WFC), JPMorgan Chase (JPM) and Bank of America (BAC) each said they would buy back at least $20 billion of their own stock after the Federal Reserve gave them a clean bill of health late last month.

The buyback boom is terrific news for shareholders — and corporate executives. When companies repurchase vast amounts of stock, they provide persistent demand that tends to boost share prices. Buybacks also artificially inflate a closely watched measure of profitability known as earnings per share.

The Republican tax cut created a windfall for Corporate America. The legislation slashed the corporate tax rate to 21% from 35%. It also gave companies a tax break on foreign profits that they return to the United States.

The tax law and strong economy have combined to fuel record profits. CEOs are choosing to use a large chunk of that money to reward shareholders.

S&P 500 companies repurchased $189 billion worth of stock during the first quarter, topping the record set in 2007, according to S&P Dow Jones Indices. Apple (AAPL) alone bought back $22.8 billion of its stock, the most of any company in any quarter in US history.


Related: Are stock buybacks deepening America's inequality?


Of course, anything that helps the stock market can help the many American households that own shares directly or indirectly through retirement plans.

However, critics of buybacks argue they disproportionately benefit the rich. That's because the top 10% of households owned 84% of all stocks in 2016, according to research from NYU professor Edward Wolff.

Corporate America has shared some of the spoils with workers. More than 5.5 million employees have received a tax cut bonus, a pay raise or a sweetened 401(k), according to the White House.

But shareholders are coming out far ahead. TrimTabs notes that the $436.6 billion of buybacks announced during the second quarter would have paid for a $1,000 bonus check to be sent to 6.8 million workers — every single trading day.

A stated goal of the tax law was to encourage businesses to spend more. But it hasn't helped much, at least not so far.

Real nonresidential fixed investment, one broad measure of business spending, increased a solid 6.1% during the first quarter. While that is healthy growth, it was roughly in line with recent quarters and was slightly slower than the end of 2017.

It's possible that second-quarter economic growth figures, due out later this month, will show companies spent more on equipment, factories and other investments that create jobs and boost wages.


Related: Execs are cashing in on the explosion in stock buybacks


However, researchers at the San Francisco Federal Reserve said on Monday that the tax law may not pack much of a punch because the US economy was already healthy. Washington normally stimulates the economy during a downturn, not a boom.

The San Francisco Fed said that recent research suggests the tax cuts could boost the economy very little — or perhaps not at all.

A safer bet is that the explosion of buybacks will help enrich corporate executives, whose compensation is often linked to their share price.

Last month, an SEC official detailed a disturbing trend: In the days after companies announce buybacks, execs quietly cash out their own shares. Daily stock sales spiked from an average of $100,000 to more than $500,000 per executive, according to SEC Commissioner Robert Jackson Jr.

Defenders of buybacks argue that they are a legitimate use of excess cash. The money doesn't vanish. Shareholders can use their winnings to boost the economy by investing in new companies or purchasing a home.

JPMorgan CEO Jamie Dimon recently slammed critics of buybacks as "people who are basically ignorant."

Great tax breaks! yeah Trump

Now none of that will find its way to the working poor.

Did you read the part about $ 1,ooo dollar bonus checks?

Trickle down economics is a sham. Regular folk will never see any of this money. You will hear loud and proud about the ones who do, but it will be a drop in the bucket.

one offs. Corps and the rich get to do this every year forever.

Mutual funds and other investment vehicles available to the people that pay taxes are reaping the benefits of the buy back too.

I fail to understand why people that pay no federal income taxes right out of the gate are upset that people that do pay taxes get a break on something the complainers are getting a 100% break on.

The "butwhataboutme" crowd.....

It’s a laughably fractional amount of money compared to what the top is earning in comparison. They’ve got you believing a $1000 is ‘a lot’ of money... meanwhile they drop that on a bottle of champagne while celebrating their financial windfall.

Yes. I understand that to many families a $1000 (closer to $600-$650 after taxes) is helpful. That’s the real problem you’re not seeing. The fact that $650 seems significant to people that work 40 hours a week is the problem. It won’t cover a month’s rent in any major city around the US. The wealth iniquity in this country is the problem.
Keep blaming the poor. The super wealthy love that so many people look down on the poor as the problem. Instead of looking up at the wealthy living in tall towers where they pillage the coffers.

that is about 700 billion in buybacks in the last 6 months. They are not re-investing in labor, wages or new United States manufacturing.

And next on the repub wish list will be domestic program cuts and a try at entitlement reform because there is not enough revenue coming in.

Corporations only hire people and create jobs when the demand for their products increases. People who buy into anything else have no clue how any of this works.

Bro I been saying this is a heist for over a year. Nobody listens.

Largely it is. The problem the repubs have with trickle down is similar to the problem Obama had with healthcare... they rely on the good graces of corporate America and we have seen time and again that when push comes to shove, corporate America is going to take the money and run. "Giving" companies a sweeter deal and trusting (or hoping) that they will use the excess to increase wages or relocate factories back here (when they don't have to in order to be competitive) all relies on the premise that they are willing to accept less than maximum profit.. and companies just aren't going to do that.

Companies are going to charge as much as they can for their products and services while paying the least they can for their labor and inputs.. that's what companies do, that's how they maximize profit. In a capitalist model, a company is NEVER going to pay somebody $15/hr to do a job if they can find somebody else willing to do it for $10/hr.... They will find that point at which they can live with the level of service provided and the amount of turnover anticipated and that's what they will pay and not a penny more.

The income gap is the single biggest problem we have in this country today.. it's my opinion that most of the politicians know it and could take some steps to fixing it but they won't because they need to use it to stay in power.

Even as the economy was growing under Obama the biggest complaint was, it's not growing fast enough.. I'm a firm believer that it shouldn't grow TOO fast because every time it does, there is just a correction/recession at the end that, like most things, always hits those at the bottom the hardest... but politicians don't care. They want to brag about their economic growth and just hope that they are out of office before the inevitable correction... or that they can take credit for the growth and blame the correction on "the other side"... we've been through this cycle about 8 times in my adult life and we will continue to go through it because almost nobody wants to fix it.

Bernie was one of the first willing to throw out a plan to fix it, problem was that he was TOO extreme about it. Our economy would be on more solid footing, enjoy more sustained growth and be less susceptible to major market fluctuations and recessions if the working poor and the lower middle class made more money.. it's pretty damn simple.

Yes, we would have some level of inflation with that but not all inflation is bad.. moderate inflation is a sign of growth..

Get more money out of the coffers of the uber-rich (both personal and corporate) and into the hands of the lower middle class and the working poor (who will spend it instead of sitting on it).... they will stop being a drag on the economy, they will have greater fulfillment, crime will go down, urban blight can begin to be corrected, jobs will grow, education and healthcare can be improved, anxiety and animosity will go down between classes, a stronger middle class will grow...

For decades, I've bought into a more pure form of capitalism as the best means of growing an economy.. I'm really starting to rethink that. Capitalism certainly has provided us with a lot of benefits but I'm having trouble justifying in my mind how it is good for the economy that the CEO of Wal-mart got a 13% increase last year to $22.4 million a year while the millions of folks who work for him to make that possible also have to receive public assistance just to live...

And the CEO got a nice personal tax cut.. which will create zero jobs because that is his personal income, which he won't spend, doesn't need to spend.. it will just get stuck away on top of the piles of money he already has.... what would create jobs is if everybody who worked at Walmart got a nice raise because they would spend the money, increasing demand for good and services... The economy grows ONLY when demand grows and demand grows when people who need it have more money to spend.

I wish I saw more posts like this one.
Nice job.

I would have voted for Bernie over Trump. Bernies tax plan was reflective of the majority, the elite rich are too rich. They put gender over policy and lost and it's costing all of us.

The richest 10% of the population owns over 80% of the wealth in the market. Buybacks just consolidate the wealth even more while giving the everyday American, who rarely withdraws from their investment portfolios, a small bump on their computer screen. Of course that gain could be wiped out in another market crash, which I don't think is extremely likely this term, but more than likely over the next decade. Capital wealth is the biggest scam for the working class. They often times do not have enough assets to make money from it without serious long term investment. I've stated many times on this forum that the best way to build the middle class would be to tax capital gains higher than taxes on wage.

We're in the midst of wealth inequality rivaling French Revolution levels, wages are ridiculously stagnant, the middle of the country has turned into a snake pit of closed strip malls and opiate addicts, and the market by any and all indications is headed for a massive bubble burst crash that's propped up by nothing, and they literally think saying "stock market" means something like it meant something in 2007.

I've been wondering who they're going to blame the crater on. It's coming in like 2.5, maybe 4 ears at best. It will be interesting to see where the narrative goes. Trump probably gets a second term unless he does rage-tweeting on the toilet, so my guess would be on prospective slight gains in the midterm.

Question to see if I'm reading that quote correctly.

Are they giving $1,000 bonus to 6.8 million workers every day?

Easy, companies need the extra cash to offset Trumps tariff wars.

I would love to see how much Trump makes off these tax cuts for the average joe.

But he's donating his paycheck.

According to some he's not making anything because he's in debt, all of his projects are failing, and he has no income..

I would consider voting for Bernie if somebody could promise me that congress was only going to give him about 25% of what he wanted..

And I'm not sure if they chose gender over policy or if they just chose the Clinton name.. probably a little of both..

Fantastic post. I agree that the disparity in income and wealth, that is only getting worse, is a source of many of our problems. It's also the source of power for many in charge as a few others have mentioned.

I think focusing on growing the middle class is the starting point. CHS brought up taxing capital gains at a higher rate than wages. I have some reservations about that primarily because it could provide a disincentive for investment, but it's on the right track. I think the answer is giving a tax break on investments that targets middle and lower income groups to provide incentive to reinvest. Say that the first $100k/year you earn from investments is tax free (or taxed at a lower rate). Change the threshold, add more tiers to it if you like - first 10k is tax free, next 40k is taxed at 10%, whatever. I merely want to incentivize investing and saving to help bolster the lower two classes.

I am not suggesting redistribution - it's a dirty word (and the wrong one in my opinion), but we at least need to do something to get the ball rolling the other way. Bernie seemed to get that as you mentioned, and though I didn't agree with a lot of what he said, he was the candidate I most supported based on this concept alone.

I don't blame the working person. You seem to be blaming the wealthy for being wealthy.

The problem is people knocking back $300,000 a year are looked at as super wealthy.

Dude, that isn't super wealthy. Well off no doubt, but those people work hard for their money. Nope, they aren't out on the hot shop floor in most cases, they are in some office with a heck of a lot of responsibility.

You don't leave jobs like that after 40-50 hours 5-6 days a week. That is 24/7, 365 days a year.

Dude, I have a answer to all the pissed off liberals that got a BONUS or TAX BREAK.
Instad of getting angry just pass it on to me. One guy got mad because 1k after taxes is ONLY $650. Dems always give better tax breaks....Wait a minute they don't give tax breaks. They just raise them.

They're going to need them when their taxes go up. They didn't get a permanent tax cut like the ultra wealthy and corporations did.

But I'll give you my tax refund if you give me yours every year following that. Fair deal?

Listen to this GOP Senator talk about the rubes Trump is killing
financially in his state.

Another point I would like to make. President Trump is doing more for the working stiff than any President in the last 50 years.

We talk about "Buy American" until it comes time to pay the price to buy American. It sounds like many of you are happy with American factories shutting down.

If you are going to talk the talk, you need to walk the walk.


You folks do realize that the President got a big portion of the Union vote don't you? You know, like steel worker, coal miners, auto workers.....jobs he is trying to preserve?

The only damn thing the Dems are promising you is a housing project future with some free food.

Be better than that!


Don't settle for Room and Board.

Wrong.

And? I'm sorry but I think what you say is straight up bull. If those 80% own a lot of wealth, what's your problem with it? Are you jealous? Do you want to be part of that elite? If someone works hard enough they can be successful. Do you not believe that?

What your advocating for is a class system, wealth redistribution scam, similar to a pyramid scheme. If you have this you take away the natural economic incentive to strive and work hard, which would be a huge problem. If I know that once I make it in the world, I'm going to have to give up a large percentage of my money to someone who hasn't earned it, why would I put in any effort to be successful? Why would I do it? If I lived in another country that currently did not have this kind of tax schema, and was an outsider, why would I move to this other country where all my wealth would be taxed and given to the poor?

Pretty sure capital gains tax shouldnt be raised as investments are the main vehicle for the middle class to protect their retirement.

Actually the exact opposite. I believe wage labor should be taxed less and investments should be taxed more. Also capitalism is a pyramid scheme, if it wasn't then wealth wouldn't accumulate at the top and have to "trickle down".

Also, I hardly work at all and live on my investments from cryptocurrency and the stock market. I'm advocating for a system that would hurt me the most.

The thing is...you're not the average person.

Most people are joe blow depending on 401k for retirement.

So taxing that is a hardship.

You were right when you said it was a great tool to protect retirements, but it's a crappy way to build them.

Only if you dont have a financial advisor.

My wife brings in over $300,000 a year. But, she's in the medical field.

Then again, she is Hispanic and according to some people.........she doesn't belong in this country.

The fact that you say capitalism is a pyramid scheme tells me all I need to know about your views.

So, if you were to make a shaped diagram of our economy, what shape would you use?

The average financial adviser is as good as a machine picking random stocks. There are certainly amazing financial advisers, don't get me wrong. I have quite a few shares invested with Warren Buffet and will not divest until long after he's dead. However, if people could make more money on their wages they would have more money to save or invest in the stock market. Or they could blow it, I guess. I'm not going to tell you how to spend your money.

I would draw a vertical rectangle with slices depicting what percentage of industries drive percentage of the economy. You also didn't answer the questions I asked from the previous reply about taxes, incentive, wealth redistribution, determination and success.

This makes me wonder if you don't believe in capitalism? Are you against it?

I guess my guy is a mystic then. He isn't doing anything special but he keeps my accounts earning a lot every year. I don't add any money, except on one of the accounts. So part of it is just a good market and part of it is his magic powers.