What the 2017 tax cuts did (and didn’t do)

There was a point in early 2018 when big U.S. companies couldn’t stop talking about the tax cuts supported by President Donald Trump and approved by Congress at the end of the previous year. Flush with the projected savings from a $1.5 trillion law, they promised to raise wages, hand out bonuses to workers and invest in big projects.

A year later, the picture has changed. Analysts noted that the handouts to workers amounted to a relatively small share of the roughly $200 billion in federal income taxes that corporations avoided thanks to the cuts.

While the long-term effects remain to be seen, the evidence does not suggest the sustained growth boosts that were predicted. Many economists, including those at the Federal Reserve, are cutting their growth forecasts for 2019, in part because of the waning effect of the tax cuts.

Here’s a look at what companies promised and what has come to pass as we begin Year 2 of the Tax Cuts and Jobs Act:

Corporate profits

Corporate earnings over the past several quarters show why companies were such enthusiastic cheerleaders of the tax cuts. By cutting the corporate rate to 21 percent from a high of 35 percent, the law has reduced the effective tax rate that many companies pay.

That has fueled after-tax corporate profits, which rose nearly 20 percent in the third quarter from the previous year. The tax law was clearly a driver of that increase — because profits before taxes rose at a much slower rate. In the last half-century of the U.S. economy, it’s been rare for after-tax profits to grow so much faster than beforetax profits. But the economy is on track to grow at about a 3 percent clip, after adjusting for inflation.

Walmart has saved at least $1.6 billion for the first three quarters of 2018, compared with what it would have paid under its previous effective rate. Bank of America has saved at least $2.4 billion over the same period. AT&T has saved $2.2 billion, Verizon $1.75 billion and Apple about $4.5 billion. In welcoming those windfalls, companies promised to help workers.

Bank of America’s chief executive, Brian Moynihan, told workers in a memo last year that the new law would reduce the bank’s tax rate, and that “in the spirit of shared success, we intend to pass some of those benefits along immediately” to workers.

Effect on pay and jobs

Job creation accelerated across the economy. But strong growth has not spared the jobs at large companies where executives have cited automation, outsourcing and restructuring to explain why they reduced employment.

Apple promised to add 20,000 domestic jobs over five years, along with making other U.S. investments. So far, it is on track: It added 6,000 employees in 2018. (It also announced a $100 billion stock buyback program and a dividend increase worth $2 billion.)

Walmart increased its starting wage to $11 an hour, gave bonuses of up to $1,000 each for associates and expanded some benefits like parental leave. The wage increase amounted to $300 million more than the company had planned before the cuts. Its employment levels have not changed.

Other companies have cut workers, even as they enjoy windfalls. Bank of America gave bonuses of $1,000 last year, which it attributed to the law, and said this fall that soaring profits will spur a second round of bonuses. Its dividend recently jumped by 44 percent, and it has announced $20 billion in stock buybacks since the law passed.

Yet it has cut 5,000 jobs, continuing a trend that dates to 2010, when Moynihan took over as chief executive. Technological changes, including a rise in mobile banking, have resulted in 100,000 jobs being eliminated during his time at the helm, Moynihan said.

Another bank that reaped billions, Wells Fargo, plans to reduce its workforce by up to 10 percent, citing changes in customer demands. Wells Fargo has announced $40 billion in stock buybacks since the law passed.

AT&T handed out $200 million in worker bonuses and contributed $800 million to its employee and retiree medical trust fund. It increased its dividend for the 35th consecutive year.

It also appears to be shedding employees. Officials at the Communications Workers of America, the union that represents AT&T workers, say the company has cut more than 10,000 union jobs during the year.

Verizon has cut 3,100 positions. The company announced this month that 10,000 more workers have accepted a buyout as part of an effort to reduce its head count while ramping up its push into the next generation of wireless technology, known as 5G.

Did investment get a boost?

Apple, Walmart and other large companies have increased their capital investment after the tax cuts, as have businesses across the economy. Nonresidential fixed investment spending grew 11.5 percent in the first quarter of the year and 8.7 percent in the second.

But growth fell to 2.5 percent in the third quarter, coinciding with a slide in oil prices — which have disproportionately driven recent investment growth.

White House officials predict that investment growth will bounce back this year, driving further productivity gains and lifting wages for workers.

BRYAN ANSELM / THE NEW YORK TIMES Walmart saved at least $1.6 billion for the first three quarters of 2018, compared with what it would have paid. It also increased its starting wage, gave bonuses and expanded some benefits.

BRANDON THIBODEAUX / THE NEW YORK TIMES AT&T, saving $2.2 billion, handed out bonuses and contributed to its employee and retiree medical trust fund, but it also appears to be shedding employees (more than 10,000 union jobs during the year).

TAMIR KALIFA / THE NEW YORK TIMES Apple has saved about $4.5 billion but also promised to add 20,000 domestic jobs over the next five years, along with making other U.S. investments. So far, it is on track: It added 6,000 employees in 2018.