Senator Marco Rubio (R-Florida) just accidentally let it slip that the tax cuts Republicans passed last December were only beneficial for the rich.
In a recent interview with The Economist, Sen. Rubio expressed an open dislike of the supply-side economic philosophy adhered to by his party’s leaders, advocating for more government intervention in the market to ensure economic stability.
“Government has an essential role to play in buffering this transition,” Marco Rubio said regarding his call for programs to help re-train workers displaced by a rapidly changing economy. “If we basically say everyone is on their own and the market’s going to take care of it, we will rip the country apart, because millions of good hardworking people lack the means to adapt.”
However, perhaps the most telling part of the interview was when Sen. Rubio went after the trickle-down philosophy behind the Republican tax cut package of 2017. Even though Rubio ultimately voted for the bill after Senate Republicans included an expansion of the child tax credit, the Florida Republican pointed out that corporations kept a vast majority of the extra money from the tax cut for themselves.
“There is still a lot of thinking on the right that if big corporations are happy, they’re going to take the money they’re saving and reinvest it in American workers,” he said. “In fact they bought back shares, a few gave out bonuses; there’s no evidence whatsoever that the money’s been massively poured back into the American worker.”
Sen. Rubio has a point — corporations took advantage of the new tax cuts by rewarding investors with higher stock prices through purchasing their own stock. As Marketwatch reported in February, Goldman Sachs calculated that corporate stock buybacks were up 22 percent just six weeks after the tax cuts passed, while investment in expanding businesses increased by just 3 percent.
To be fair, corporations using the extra money for stock buybacks is hardly surprising for anyone with a memory of recent history. In mid-November, roughly a month before Congress passed the tax cuts, Wall Street Journal associate editor John Bussey asked a roomful of CEOs to raise their hands if they planned on using the extra money to increase capital investment in their businesses. Only a few hands went up.
1. Tax-overhaul backers say corporate rate cut will encourage investment by businesses
2. During #wsjceocouncil interview with Gary Cohn, WSJ asks CEOs to raise hands if they'll boost investment if rates cut
3. Few CEOS raise hands
4. Cohn asks: "Why aren't the other hands up?" pic.twitter.com/5PI60NlW0A
— Tim Hanrahan (@TimJHanrahan) November 14, 2017
Corporations using money saved through tax cuts to reward investors with pricier stock also happened during the Bush administration. In 2004, Congressional Republicans passed a bill allowing corporations a “repatriation” tax holiday in which money stored in overseas, tax-free bank accounts could be brought back to the United States at just a 5 percent tax rate, rather than the typical 35 percent rate.
However, the Wall Street Journal estimated that the 15 companies that repatriated the most money actually ended up buying back their own stock to enrich investors while simultaneously laying off nearly 21,000 workers in the following three years after the legislation was passed.
“There is no evidence that the previous repatriation tax giveaway put Americans to work, and substantial evidence that it instead grew executive paychecks, propped up stock prices, and drew more money and jobs offshore,” then-Senator Carl Levin (D-Michigan) said at the time. “Those who want a new corporate tax break claim it will help rebuild our economy, but the facts are lined up against them.”
Some Democrats are running against the Republican tax cuts ahead of the 2018 midterm elections. Rep. Ro Khanna (D-California) told The Hill that he’ll push for the repeal of the tax bill should Democrats win back control of the House of Representatives after this November’s elections. While Marco Rubio isn’t personally up for re-election this year, many Senate Republicans are, with close races expected in Arizona (for outgoing Sen. Jeff Flake’s open seat), Nevada (against incumbent Sen. Dean Heller), Tennessee (for outgoing Sen. Bob Corker’s open seat), and Texas (against incumbent Sen. Ted Cruz).
Logan Espinoza is a freelance contributor specializing in economic issues. He lives in Phoenix, Arizona with his wife and daughter. Contact him at logan DOT espinoza AT yahoo DOT com.