This won’t help the GOP’s tax cut message: U.S. companies are using the benefits of their tax cuts to reward shareholders and management far more than they are on hiring and pay raises, according to TrimTabs, a market research firm.
American companies committed $305 billion to stock buybacks and cash-fueled merger deals in the first quarter of 2018, more than double the $131 billion they put toward pre-tax wage growth for workers, TrimTabs says. Those quarterly numbers translate to an annual spend of $1.22 trillion on mergers and buybacks. “Companies are highly unlikely to spend anywhere near $1.22 trillion hiring and paying existing workers more this year,” TrimTabs said in a release. It added that pre-tax wages for newly hired and existing workers increased an average of $450 billion a year over the five years.
The new numbers also continue an existing trend of companies spending much more of their cash on buybacks and takeovers, which TrimTabs notes tend to disproportionately boost the compensation of top managers, than on hiring and wages. From 2013 through 2017, companies committed $4.9 trillion to cash deals and share buybacks compared with $2.3 trillion to wage increases.
The bottom line, according to TrimTabs: “The recently enacted corporate tax cut is likely to deliver far more benefits to top management and investors than to typical American households.”