Six months later – tax cuts – what companies have been doing
Bottom Line: As per usual The Tax Cuts and Jobs Act was used as a political football. In December around the time of the passage, peak hysteria was playing out by those with political agendas. While my analysis showed that the average full-time employed person would save aprox. $1,800 in taxes this year with well over 90% benefiting from the tax cuts - the media narrative was highly politically charged and overwhelmingly wrong.
Not only has economic growth picked up on back of the tax cuts, we've experienced the lowest unemployment rate in 18 years, best net increase in tax home pay 32 years and record low minority and female unemployment rates as well as companies have ramped up hiring. Digging a little deeper into the effect of "trickle-down economics" on the corporate side we see an even clearer picture of how the average person's benefitting from the corporate tax cut in addition to the personal benefit.
CNBC has a CFO Council they routinely use to determine what's going on inside of America's companies. The first major takeaway is that well over 70% of all companies have taken action they wouldn't have taken already this year due to tax reform. Rather than focusing on all of the activity that's occurred I wanted to home in on just the activity that CFO's said only occurred due to tax reform. In other words, positive activity that CFO's attribute 100% to the reform. Here's the outcome:
20% - Bonuses
20% - Debt reduction
15% - employee raises
15% - share buybacks
10% - upgraded software
5% - upgraded equipment
5% - dividend payout/increase
This paints a much clearer picture of what's real. Much of the media and political noise has focused on stock buybacks. While that's provably a benefit for most Americans anyway (52% of Americans own stocks), only 15% of the benefit of tax reform has been used that way in corporate America. Every other use has direct benefit to employees and the economy generally. The more you know...