The Corner

Economy & Business

The Trump Corporate Tax Cuts Will Raise Wages


Is the Trump corporate tax cut working?

First, jettison the debate you have been hearing. Corporate bonus payments do not indicate that the reforms — lowering the corporate rate from 35 to 21 percent, and (temporarily) allowing businesses to write off the full cost of certain investments in the year they are made — are working to raise the wages of workers and increase business investment.

And opponents of the law are making misguided arguments, as well. They argue that businesses aren’t “using” their tax savings “appropriately.” But the idea was never that the tax cuts would generate a pool of money, which could be used to raise wages, increase investment, or for stock buybacks.

How are the tax cuts supposed to work?

The rate cut provides incentives for self-interested companies to earn additional taxable income by allowing them to keep more of it. Businesses respond to these incentives by making additional investments in, say, factories and equipment in the U.S. The full-expensing provision also makes U.S. investment more profitable and therefore more attractive to businesses.

The additional investment will make workers more productive, because they can produce more output with more capital. More productive workers are more valuable to businesses, which will compete for employees more aggressively. This will drive up wages, as employers try relatively harder to retain their existing workers and to attract new ones (both from other businesses and from outside the labor force).

My latest Bloomberg column argues that there is every reason to expect that this basic economic argument will play out. We should expect the corporate cuts to raise investment and wages.

Check out my full argument here. Your comments, as always, are very welcome.

Most Popular

Politics & Policy

Ten Questions for the ‘Squad’

Democratic infighting reached a fever pitch last week with bickering and personal attacks between members of the “Squad” and other House Democrats. During that period, Squad members Alexandria Ocasio-Cortez, Ilhan Omar, Rashida Tlaib, and Ayanna Pressley mostly avoided doing interviews. However, that all ... Read More

The Rise of the Chinese-American Right

On June 13, during a nasty storm, a group of Chinese New Yorkers gathered in front of the gates of Gracie Mansion, the New York mayor’s residence on the Upper East Side, to protest. Inside, Mayor Bill de Blasio was meeting with two dozen or so representatives of the Asian-American community to discuss his ... Read More

How Beto Made Himself into White-Privilege Guy

Robert Francis O’Rourke is white. If it’s any consolation, he’s very sorry about that. “Beto” has been running from his Irish ancestry for some time now. Long before the Left fell headlong into the logical termini of its triune fascination with race, power, and privilege, O’Rourke sensed that there ... Read More
White House

The Trump Steamroller

As we settle into high summer and the period of maximum difficulty in finding anything to fill in hours of television news, especially 24/7 news television, two well-established political trends are emerging in this pre-electoral period: The president’s opponents continue to dig themselves into foxholes that ... Read More