Trump’s tax cut one year later: What happened?

There was a point in early 2018 when big U.S. companies couldn’t stop talking about the Trump tax cuts. 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. They scored headlines, along with applause from President Donald Trump.

The fawning faded quickly. 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. Wages across the economy ticked up, but not by nearly as much as some Republicans had promised when they voted for the law. Capital investment surged at the start of the year, but the rate of growth fell sharply in the third quarter.

While the long-term effects remain to be seen, the evidence so far does not suggest the sustained investment and productivity growth boosts that Republicans and supply-side economists 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 head into Year 2 of

The tax cuts boosted profits for big companies

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 before-tax profits; usually, it happens only around recessions, when companies rack up operating losses they can use to reduce tax bills. But the economy is on track to grow around a 3 percent clip this year, after adjusting for inflation.

Walmart has so far 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 has saved $1.75 billion and Apple has saved about $4.5 billion. In welcoming those windfalls, companies frequently promised to help workers.

“This tax reform will drive economic growth and create good-paying jobs,” Randall Stephenson, chairman and chief executive of AT&T, said last year, as the company announced plans to award worker bonuses and increase capital spending.

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. AT&T workers, say the company has cut more than 10,000 union jobs this year.

Verizon has cut 3,100 positions this year, financial filings show. The company announced this month that 10,000 more workers have accepted a buyout offer 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. This fall, Verizon reached a deal to transfer about 2,500 jobs to Infosys, a large Indian technology outsourcing company.

Verizon has paid down corporate debt by $4.2 billion this year and granted employees 50 shares of Verizon stock, a move worth more than $400 million.

Business investment growth has slowed

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 investment growth under Trump, compared with his recent predecessors.

White House officials predict that investment growth will bounce back next year, driving further productivity gains and lifting wages for workers, based in part on the high levels of planned investment that many business surveys continue to forecast.

“What we expect to see from the second part of the tax bill, which is the lower cost to capital and the higher investment, is just higher wage growth that’s sustained,” Kevin A. Hassett, chairman of the White House Council of Economic Advisers, recently told reporters.

American workers aren’t feeling happier about the law — but companies are talking about it again

That bonus wave appeared to, very briefly, buoy public opinion of the tax cuts. The law’s popularity peaked at a 51 percent approval rating in February in polling conducted by the online research platform SurveyMonkey for The New York Times.

That favor has receded. In December, SurveyMonkey found, 47 percent of Americans approved of the law, while 46 percent disapproved.

Republicans still praise the law and its benefits to businesses in floor speeches and news releases, but they did not make it a dominant campaign issue in November’s midterm elections. Support for the law, odd as it may seem, has fallen slightly from the peak among Republicans — and risen slightly among Democrats.

BRANDON THIBODEAUX / THE NEW YORK TIMES Pedestrians pass by the AT&T corporate headquarters in Dallas. After the 2017 tax law was passed, the company handed out worker bonuses and contributed to its employee and retiree medical trust fund. But it also appears AT&T is shedding employees.