Taxes

The GOP’s Tax Cut Buyback Binge is Over

JM Ashby
Written by JM Ashby

Average Americans saw little if any benefit from the package of tax cuts the GOP passed in December of 2017 while the overwhelming majority of the windfall was distributed to executives and wealthy shareholders as corporations channeled it into record buybacks of their own stock.

Now, while the GOP's tax cuts have long since faded from reports on economic growth, they're now fading from corporate headquarters where the buyback binge is ending.

Goldman Sachs, the second largest investment bank in the world, is warning clients that buybacks are declining and it could have consequences for the greater economy.

Corporate buybacks are “plummeting” as companies tighten their purse strings, and it could have a big impact on the market, Goldman Sachs warned in a note to clients.

In the second quarter, S&P 500 share buybacks totaled $161 billion, about 18% less than the first quarter, the firm found. The amount spent on buybacks this year is down 17% from a year earlier, although it is on track to be the second highest total on record, Goldman said. [...]

The slowdown in buybacks is part of a larger trend of spending cuts, Goldman found, as trade uncertainty and stalling global growth weigh on the market.

The GOP's tax cuts for corporations and the rich did not significantly increase economic growth or lead to significantly higher wages for workers because corporations did not invest the money in their own business like Republicans claimed they would.

What little the tax cuts added to the economy came in the form of these buybacks which are now slowing.

I don't know who the Democratic nominee will be in 2020, but whoever they are is likely going to run on policies that will require rolling back or replacing the Trump era tax cuts that have added virtually nothing to the economy. These tax cuts are a void that isn't contributing to investment, wages, or growth. It's a black hole.

Passing new taxes or rolling back tax cuts won't be easy in any case, but I don't think it's going to be as difficult as it has been in the past to sell it to the public.

I suppose you may feel differently if you're a shareholder, but the vast majority of Americans are not shareholders.

  • muselet

    Goldman Sachs gets this week’s No Sh*t Sherlock Award for pointing out that the drop in corporate buybacks—and spending cuts generally—will negatively affect the economy.

    Of course, the Rs’ tax cuts were never intended to stimulate the economy as a whole, only to funnel more money to those who already have more than they could spend in a dozen lifetimes.

    The next president is going to have a job of work to undo at least some of the Rs’ distortions to the economy.

    –alopecia

  • 1933john

    We are all shareholders of the “Dept” .

  • Aynwrong

    If only the NY Times ran op-eds as blunt and clear.