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February 20, 2018 5:50 AM Age: 3 yrs

Enjoy Your Bonus—I Guess

Category: AC - Billboard, AC RSS, A/F News, ERM News, A/F Commentary & Opinion, ERM Commentary & Opinion, GPG News, GPG Commentary & Opinion, ESG Highlights, ESG Highlighted Commentary
Source:  Larry Checco, featured commentator

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If you’re lucky enough to have received them, that three percent raise and $1,000 bonus your company just laid on you, well….

…Don’t go spending it foolishly or in one place!

The raise will most likely get eaten up by inflation faster than you can spend it, especially with health care costs and insurance premiums, housing and gas prices all expected to rise dramatically over the next several years.

As for the bonus?

At a recent Brookings Institute event, Sen. Orrin Hatch (R-Utah) who chairs the House Committee on Finance and helped orchestrate the recent Republican tax reform bill, which billionaire Donald J. Trump jubilantly signed into law, went to great lengths to laud the 300-plus companies that are using their tax savings to give their employees from $500 to $2,000 in bonuses.

Granted, a $1,000—better yet, a $2,000 bonus—to many of us is a nice piece of change. But it’s certainly not a game changer.

Consider: A middle-income, married couple with two children is estimated to spend $233,610 to raise a child born in 2015, according to a recently released report from the US Department of Agriculture. And that number only covers costs from birth through age 17—it does not include college expenses.

Also, bonuses have no impact on long-term benefits, as do wage increases.

So how will companies deal with their corporate tax slash, which went from 35 percent to 21 percent?

A recent Morgan Stanley survey of 556 companies found that they are likely to do the following with their tax savings: 43 percent intend to fatten dividends and share buybacks; 19%said they most likely will engage in mergers and acquisitions; only 17% anticipate more capital spending; and only 13% think higher wages are likely.

As for the tax savings for individuals and families, Senator Hatch went on to say that he had “a good story to tell”—and a good public relations story it was.

“I think we did a pretty good job under the circumstances,” Hatch said, emphasizing that “the middle class [is] getting the largest proportional (my emphasis) benefit from the tax cuts.”

If you like numbers, technically that may be true.

But the fact remains that while most households would get a tax cut from the Republican tax bill, 82.8 percent of the benefit would go to the wealthiest one percent.

According to the nonpartisan Tax Policy Center (TCP), the average household will pay about $1,600 less in taxes next year. The top one percent, however, would receive an average cut of $20,660.

The richest-of-the-rich, meaning the top 0.1 percent earning $5.1 million or more a year, would get $148,260 back on average.

The rich, says the TCP, will greatly benefit from the plan, despite Trump’s repeated claims to the contrary.

And all this tax cutting that primarily benefits the wealthiest among us—enacted by ostensibly fiscally conservative Republicans—amounts to another $1,500,000,000 to our debt. Ouch!

Look, if the Republicans truly wanted to help working lower and middle class families, and they were willing to commit that kind of money, they should have done just the opposite.

They should have given the bulk of the tax cuts to the 99 percent of Americans who would go out and spend it, resulting in greater corporate profits and stimulating economic growth—which would benefit us all.

Instead, once again we’re expected to rely on the kindness of strangers—meaning corporations and the rich—to trickle down to us whatever they deem fit.

So enjoy your raise and bonus. It may be a while before you see them again.

Larry Checco
Copyright (c) 2018 by Larry Checco – All Rights Reserved



Published by: Corporate Governance & Accountability Advisors, Inc. Content & Concepts ©2008 by CG&AA, Inc. All rights reserved