Will the tax cut raise wages?

Across America, it seems, giant companies are passing out benefits, crediting the newly enacted tax law for enabling their largesse. Southwest Airlines awarded $1,000 bonuses to its employees; three competitors followed. Fiat Chrysler offered 60,000 hourly workers $2,000 bonuses and announced plans to move some production from Mexico to Michigan. Several utilities have plans to pass on their tax savings in the form of lower rates for electricity. And Walmart, employer of one million, announced a new $11-per-hour minimum wage, up from $9, and bonuses ranging from $200 to $1,000; it’s a total of $700 million, or about a third of the tax cut the company expects in 2018.

The Trump administration and the Republican lawmakers say this disproves critics who said their bill lavished a big helping of tax relief on corporations and the rich, with only meager gains for everyone else.

“I do not think that is crumbs,” House Speaker Paul Ryan, R-Wisconsin, said.

It’s unlikely that the announcements of wage hikes or bonuses represent anything more than a publicrelations consequence of the tax bill. To the extent companies are paying people more and offering better working conditions, such as family leave, it more reflects the overall tightness of the labor market, and the resulting enhanced bargaining power for workers.

Still, the core provision of the tax bill — a sharp decrease in the top corporate tax rate, from 35 percent to 21 percent — could indeed help solve the stubbornly slow growth in wages that continues to plague the U.S. economy long after the Great Recession. Assuming companies spend their windfalls on new productivity-enhancing investments, that will ultimately lead to higher wages — though economists point out that many firms are already sitting on piles of cash they have not so invested. At the margins, pro-business tax policy might also boost the rate at which Americans form new businesses, which has also declined in recent years.

However, that addresses only three of the 13 causes of wage stagnation identified in a recent Brookings Institution report on the issue. Some of those factors, such as the eight-percentagepoint drop in the share of national income going to labor between 1973 and 2017, might actually be aggravated by a tax law that overwhelmingly favors capital income, and the mostly rich people who earn it. Others, such as changing demography, are not at all affected by the law. Republicans actively oppose an increase in the federal minimum wage.

There may indeed be growth in jobs and wages as a result of the new law, but it’s far too early to tell how much. What’s also crucial to keep in mind is that, whatever the bill’s benefits, it has costs, too: It adds $1.5 trillion to the federal debt over the next 10 years, most of which goes to the most well-off people in our society, and which eventually will have to be paid for in higher taxes or reduced services for everyone else. That’s not crumbs, either.