The 2017 Tax Cuts and Jobs Act (TCJA) was presented as beneficial for working-class families and a driver of economic expansion. Then-President Trump and Republican legislators asserted that the nearly 50% reduction in the corporate tax rate would generate more employment opportunities, higher salaries, and increased investment in American ingenuity and infrastructure.
Now that Trump is again in office, Republican members of Congress are prioritizing the extension of the Trump tax cuts to, in the words of House Ways and Means Chairman Jason Smith, “deliver on President Trump’s promises to the American people.”
However, after eight years, the actual impact is apparent. The TCJA significantly boosted corporate earnings but provided minimal benefits to working families. Instead of reinvesting these profits, corporations have enriched their shareholders, resulting in record profits and increased inequality.
A from Groundwork Collaborative analyzed corporate pricing and profits since the enactment of the 2017 Tax Cuts and Jobs Act (TCJA). Our analysis supports the long-held suspicions of many economists and workers: the TCJA greatly increased corporate profits, which companies directed to shareholders, offering little advantage to the broader economy.
The data reveals a clear pattern. Following the TCJA’s reduction of the corporate tax rate from 35% to 21%, corporate profits surged. However, rather than utilizing these gains to employ more individuals or raise wages, companies primarily allocated the surplus to stock buybacks and dividend payments, enriching their affluent shareholders and improving their financial reports. From 2018 to 2022, S&P 500 companies alone spent over on buybacks and dividends, vastly exceeding investments in labor, infrastructure, or research.
Consider PepsiCo. Despite consistently citing rising production costs as the reason for price increases, the company enhanced its profitability, reporting a between 2021 and 2023. To achieve this, the company increased prices by double-digit percentages for , directly passing costs—and more—onto consumers and . Simultaneously, it distributed to its wealthy investors.
Comcast followed a similar pattern. It over $43 billion in shareholder returns between 2021 and 2023, while broadband and cable prices. During the same timeframe, the company . These actions benefited shareholders but increased costs for working families and made jobs less secure.
UnitedHealth, on the other hand, by 12% to exceed $22 billion in 2023 and nearly $15 billion in stock repurchases and dividends. Instead of reducing patient expenses, UnitedHealth invested in AI-driven technology that reduces company expenses by increasing coverage denials by .
These are not unique occurrences. Across various sectors, companies are opting to enrich their wealthy investors rather than expanding productive capacity, educating employees, or creating new technologies. These strategies increase share values and executive compensation but fail to address supply chain issues or invest in innovations that would reduce long-term costs.
This behavior is not only disappointing but also economically harmful. When companies prioritize shareholder enrichment over investments in their workforce and products, they and exacerbate economic disparities. Stock buybacks might be celebrated by Wall Street, but they contribute nothing to productivity, capacity expansion, or the support of hardworking Americans who enable corporate success.
Congress has the power to discourage this type of corporate negligence. The Inflation Reduction Act established a new 1% tax on stock buybacks; increasing this tax would deter companies from directing profits to wealthy shareholders and instead reward businesses that invest in their workforce and productivity.
However, Republican legislators are advocating for reinforcing the TCJA’s failed promises. This would be a significant error. We have already witnessed the consequences of providing corporations with substantial tax breaks without any conditions: they exploit them. Extending the Trump tax cuts would only perpetuate the existing situation: increased prices, stagnant salaries, weakened public services, and excessive profits for the wealthiest individuals.
Corporate America has had almost ten years to demonstrate that lower taxes result in shared prosperity. The evidence is clear: they have not fulfilled their obligations. It is time for a tax system that prioritizes working families and ensures that the most profitable corporations contribute their fair portion.
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