Donald Trump has, for the time being, fulfilled something of a campaign promise by initiating a tax cut effective the start of 2018. This tax cut legislation is meant to stimulate job growth, lessen the tax burden on the lowest rungs of American economic status and entice new businesses to pump up an economy that still isn’t what it should and could be. Those were the supposed intentions, at least, behind what Trump claimed would be the largest tax cuts since the Reagan administration. While tax cuts sound wonderful, with the vast majority of middle and lower class Americans living on shoestring budgets because their earned income and take home pay are very different, they haven’t exactly been showing the gains that Trump promised. So, what are we seeing in the first month of this new tax plan exactly?
The biggest desire in people who supported this legislation was job creation, but one major employer that has a half-century history in America has done exactly the opposite. Wal-Mart came out not long after the push-pass of the tax bill and claimed that they would be utilizing this bill to raise their minimum wage to $11/hour, while handing out up to $1,000, one time bonuses to employees. People were ecstatic. One of the largest companies and one that is consistently challenged for their poor employment practices by progressives was doing something good with the tax bill! Except…they aren’t. Following this announcement, Wal-Mart closed the doors of 63 Sam’s Clubs across the country, many of which closed with no notification of the employees. They showed up to work, only to discover their work no longer existed. Roughly ten of these stores will be reopened as e-commerce warehouses, so less than half of the staffing will be required, and only those select employees who had the training of someone who would work in a warehouse will be able to get jobs back. Otherwise, everyone else will need to fend for themselves, adding thousands of people to the unemployment rate.
This isn’t all. Those bonuses we talked about? They’re based on years of service, not hours worked like the standard quarterly bonus. So, only employees with over 20 years consecutive years of service with the company can get the biggest bonuses. These people happen to be mostly salaried managers. This is a two-fold problem. Salaried managers, as a general rule, already make far more money and have far better benefits than your average employee. This big of a bonus is just icing on an already large cake. But, there’s a flip side. New salaried managers will still be given the same bonus as a shelf stocker or a cashier who has been with the company the same amount of time. This is the same problem with the wage increase. Think this means all of the base pay goes up?
No, it doesn’t. Wal-Mart will only increase their starting wage. Anyone already over $11/hour will likely only make a few cents extra per hour. Again, a new cashier could make as much per hour now as a new department manager. In addition to these issues, the company will almost certainly be eliminating a further 3,500 salaried jobs across the company, and will possibly retain half of them or less at lower-paying positions. What no one else tells you is that they will likely have to relocate, as downgrading in the company is not permitted within one’s own store. And no, Wal-Mart does not cover costs of relocation for employees.
This sounds like a mixed bag, and that’s because it is. Yes, there will be an extra bonus, and yes, people will make a little more per hour. But, calculated out, the highest single bonus amounts to less than $20 extra per week over the course of the year. That’s gone entirely in taxes, so in the long run, that one-time bonus means nothing, and their pay is still leaving Wal-Mart far below what the average worker should be making per hour to survive in today’s economy. In fact, direct competitors Amazon and Target are doing far better for their employees already. Target will be raising their minimum wage to $13.25/hour this year, with plans to be at $15/hour by 2020, a plan announced long before the Trump tax plan went into effect. And Amazon is already paying most of their workers $15/hour or more.
Meanwhile, companies like Apple are using the tax plan as justification to bring billions of dollars of untaxed income back to America, using it to fund new employee incentive, increase wages, and invest in development. So yes, the idea of the tax cuts and some of the deregulations has been encouraging for some companies. But, that’s not to say that we should all be jumping for joy just yet. There are still further implications of the tax cuts.
Trump said that companies would not be shipping jobs or money overseas once he was president, and that his tax cuts were supposed to address such an issue. However, Carrier, the company that he claimed to have stopped from shipping jobs overseas, has recently shut down the very plant Trump claimed to save, costing hundreds of already lower class people to lose what little income they have as their jobs went to Mexico. And there was nothing to stop them, because the final version of the tax legislation allowed this type of exportation of jobs. Nothing was put in it to stop companies, and in fact, Carrier will be able to write off the costs of importing the products from these exported jobs, as well as the costs to move the jobs overseas in the first place. They’ll not only pay less in taxes, but they’ll be able to get more deductions. Obscure loopholes are now very literally written in law, and it’s only going to get harder as time goes on if these issues aren’t addressed.
Companies under the tax laws, as mentioned, will be able to write off expenses of outsourcing and relocation of facilities or material production. However, deductions for small businesses and individuals were removed from the tax code as a way to “simplify” taxes. While yes, the tax laws did increase some write-offs for the individual, other key areas were removed, creating huge issues for small areas that are the backbone of American production, and, quite frankly, some of the hardest hit areas economically. Teachers won’t be able to write off the purchases of school supplies for underfunded public schools; small town fire or police departments lose equipment deductions. Employees who are asked to relocate or lose their job will no longer be able to write off the expenses of moving for work, and some life-saving deductions for small businesses have been thrown out the window.
These may be the biggest tax cuts since Reagan, but that’s far from something to brag about. Reagan was forced to increase taxes 11 times after lowering them because the government was running out of money. The economy progressively collapsed as businesses sucked up profits instead of paying them out. In a perfect world, cutting taxes on the rich would allow them to invest in business and in the country, and the would take advantage of those chances to do so. In reality, the true form of capitalism, the exact way it is meant to work, is those who run a business will suck up all profit that can be squeezed from the resource they exploit, regardless of the consequences. Lowering taxes will only allow big businesses to swell even bigger, and eventually, that bubble must burst. It burst just under a century ago, and it can burst again if this isn’t curtailed. Trump is cutting taxes while bloating the military budget to over $700 billion: where is this money going to come from? It won’t be the Waltons or Warren Buffett.
There are only two better solutions. Create regulations and requirements for the expenditure of extra tax dollars in the form of employee benefits and investment. Or, as was the case in the 1950s, hike taxes. Back then, businesses paid 70-90 percent of their income in taxes. What did that do? Build the interstate, fund public education, fund building projects, created the housing boom and car boom of the 50s, bulk up the entertainment industry, maintain public structures and utilities, and funded the space program that sent America to the moon. The rich get enough of our money. It’s high time we see some of that come back.
Arianna is a senior Russian and History major. She is Tuesday Managing Editor for The Voice
