U.S. Secretary of the Treasury Steve Mnuchin spoke about tax cuts this Thursday at the White House press briefing, where he explained that the “whole purpose” of the flawed GOP tax bill was to “put more money in companies.”
“The whole purpose of the tax cut act was to put more money in companies so they could compete competitively with international companies,” Mnuchin told reporters. “I think you know we had one of the highest tax rates in the world. We taxed on worldwide income [and] we changed that. This is really a revolutionary process; we thought this would be great for the economy."
Not too long ago President Donald Trump publicly defended the tax cuts, saying that the bill was a gift for the people.
“It’s going to be one of the great Christmas gifts to middle-income people,” Trump said to reporters in December. “The Democrats have their sound bite, the standard sound bite before they even know what the bill is all about.”
Well, now they know. Mnuchin suggests that the administration trusts corporations and large companies to do what they want with the extra money they’ll receive from the tax cuts.
Mnuchin's claim is a bit suspect, though, given the historically high cash hoard that U.S. corporations are sitting on. In 2017, U.S. companies had a $1.84 trillion cash pile, money that they were not spending on raising their employees' wages. More shockingly, the continuing increase in productivity in American workers hasn't translated to increased wages the way that it once did. In other words, since the mid-1970s, workers have become more productive, generating more profits for their employers, without seeing the gains from that.
So if the cash hoard and productivity gains didn't result in appreciable gains for workers, why should a tax cut? U.S. corporations hardly need it. Mnuchin's logic is suspect here.
Mnuchin also announced today that the IRS released new withholding guidelines. According to Mnuchin, “90 percent of workers will see an increase in take home pay because of the #TaxCutsJobsAct!”
You can view the updated tables here.