President Trump’s chief economist Kevin Hassett says lowering big corporations’ taxes will boost wages – by perhaps thousands of dollars a year per worker. Many of the other Republican supporters of the House and Senate tax bills are trying to sell them to the American people using a similar argument. Apparently, Hassett’s theory doesn’t rest on the largesse of corporations but on several causes and effects: If U.S. corporations pay lower taxes, they will invest more in the U.S., which will spur U.S. productivity, which will generate higher U.S. wages. Wow. A lot of reputable economists are criticizing Hassett’s reliance on all these building blocks and the resulting conclusion.
Although I’m not an economist, I’ve spent most of the last 40 years practicing law, with a specialty of counseling employers on employee benefits matters. During that period, I’ve become a serious skeptic of the type of pro-worker argument put forth by Hassett and his allies for various reasons:
- Minimum wages remain staggeringly low. And whenever a movement arises to raise them, most corporations, their lobbyists, and most Republican politicians aggressively oppose. Even in those places where the minimum wage is being raised to, say, a “whopping” $15/hour, the increase typically is being phased in over a period of years.
- Corporate and Republican politician opposition to the reform of long-term, outdated overtime rules is similarly strong. Near the end of its term, the Obama administration pushed through – against fierce corporate and Republican opposition – new rules to make overtime pay more equitable and employer cheating less prevalent. At the beginning of the Trump administration, these rules were aborted.
- Many large corporations have been sitting on mountains of cash during the last several years, despite the so-called high tax rates. The primary uses in many cases: share buy-backs and shareholder dividends, not more U.S. investment or anything that benefits employees.
- In the last several decades, large and medium-sized employers have gone from offering employees generous pension plans, 401(k) plans, health insurance, and other handsome benefits to no pension plans and skimpier 401(k) and health insurance plans.
- Due in significant part to Republican money and other power, workers’ ability to influence what they’re paid – through collective bargaining and other means – has radically shrunk in recent years.
- Employer dominion over workers has been increasing in other ways, too. Rank-and-file employees are forced to sign noncompete agreements that prohibit free movement from job to job at the risk of significant financial penalties. When their employers violate anti-discrimination or other laws, employees can’t sue but must go to arbitration. Employers snoop into prospective and current employees’ credit histories and social media accounts, even where the information has no bona fide relationship to employment.
- Some companies bypass the federal and state obligations that go with an employer-employee relationship, decreasing their labor costs by outsourcing work to third-party firms or to individuals working as independent contractors.
The tax bills contain some provisions that warrant legitimate debate. For example, reasonable people can reasonably disagree about the federal tax deductibility of state and local taxes. But selling the legislation as pro-wages? Come now – not in the face of plain truths.