Corporations Use Tax Windfalls for Buybacks, Not Bonuses

Three months after President Trump signed the Republican tax law, how’s it working out for you? It all depends on whether you work on Wall Street—which got $1 trillion in tax breaks for big business and the wealthy—or in Wisconsin, where working people are facing plant closings and pink slips.

Two lawmakers from Wisconsin stand on two sides of the debate. Republican House Speaker Paul Ryan insists, “This gets us better wages, bigger paychecks.” But Democratic Senator Tammy Baldwin is cracking down on stock buybacks which swell CEOs’ stock portfolios while squeezing workers’ jobs and paychecks.

Buybacks, No Bonuses. Respected financial analysts agree that Wall Street is getting the gold mine, while workers are getting the shaft. The metrics may differ, but the message is the same:

  • Bloomberg found that shareholders are enjoying 60 percent of the tax-cut gains, while workers are getting only 15 percent.
  • Morgan Stanley reports that 43 percent of their tax savings are going to stock buybacks and dividends, while only 13 percent to workers’ raises, bonuses, and benefits.
  • In an analysis of 121 Russell 1,000 companies, Just Capital found that shareholders are getting 57 percent of tax savings, while 20 percent is going to job creation and 6 percent to current workers.
  • In fact, share buybacks are averaging $4.8 billion a day this year.

Kleenex Maker Wipes Out Jobs. Racking up $3.3 billion in profits last year and bragging that “we returned $2.3 billion to shareholders through dividends and share repurchases,” Kimberly-Clark is laying off as many as 5,500 workers, while closing or selling 10 plants globally. Many of these employees live near and work at the company’s plant in Fox Crossing, Wisconsin.

No More Buyouts and Broken Lives. Concerned about human tragedies like these layoffs, Senator Baldwin has introduced a bill to prohibit companies from buying back their shares on the open market.

  • Co-sponsored with Democratic Senators Elizabeth Warren of Massachusetts and Brian Schatz of Hawaii, the bill would also repeal a 1982 rule by the Securities and Exchange Commission allowing companies to buy back immense amounts of their own stock.

Why Wall Street’s on the Warpath against Workers’ Pensions

Only 25 years ago, 60 percent of full-time workers at large and medium-sized companies had pension plans with lifetime benefits. Now, less than 25 percent of private-sector workers can still count on retirement security.

Around 20 million public employees and educators still have traditional pensions. But these plans are under attack by the Koch brothers’ Americans for Prosperity, the Enron billionaires Laura and John Arnold Foundation, and the anti-worker American Legislative Exchange Council. Their goal: turn these pension funds into individual 401(k) accounts.

Wall Street Wins, Main Street Loses. It’s a win-win for everyone but working Americans, whose average savings are only one-fifteenth of what they’ll need for retirement. Big Business shifts the risks and responsibilities to their employees. And, as Boston University law professor David Webber explains, Wall Street makes easy money managing the 401(k)s.

Easily Exploited. Webber writes that 401(k) investors, including himself:

  • Pay high fees “that we do not understand.”
  • Accept low returns, under-performing Standard & Poor’s 500-stock average.
  • Don’t sue unethical banks like Wells Fargo.

Workers Need Pension Funds. While Wall Street says retirement funds are in crisis, 49 states have made pensions more solvent. These funds provide reliable benefits, and:

  • They have the clout with Wall Street to insist on lower fees and higher returns.
  • They conduct shareholder lawsuits against corporate scofflaws like Enron, Worldcom and Wells Fargo.
  • As do unions, they offer workers a voice on issues like exorbitant CEO salaries. As Webber writes, Wall Street’s war on pensions is “economic voter suppression.”