Hidden Rules Embedded in Trump’s Tax Law, Making the Case to End Stock Buybacks, and a Major Regulatory Rollback
May 22, 2018
By Kendra Bozarth
The Roosevelt Rundown is an email series featuring the Roosevelt Institute’s top 5 stories of the week.
1. The Hidden Rules of Trump’s Tax Law
In a smart, new issue brief, Roosevelt Fellows Darrick Hamilton and Michael Linden outline the four major ways that the Tax Cuts and Job Act will harm people of color, most notably by exacerbating today’s racial wealth gap. Federal tax policy could be improved to remove the hidden and not-so-hidden rules embedded in the tax code that hurt the economic well-being of black and brown Americans. Unfortunately, the new law will deliver more advantages to wealthy, white households relative to households of color, while simultaneously strengthening existing racial barriers to a truly inclusive economy. Linden explains more here.
2. Where Are the Jobs?
The tax code should encourage companies to invest in workers. Trump’s tax law, however, incentivizes corporate behavior that enriches CEOs and executives at the expense of employees. Roosevelt Fellow Darrick Hamilton was a guest on All In with Chris Hayes this week, where he discussed the case of Harley Davidson and its announcement of a plant closure following the company’s tax cut windfall. As 800 workers lose their jobs, the motorcycle manufacturer will initiate a $15 million stock buybacks program. “At the end of the day, [firms are] interested in profit maximization … not necessarily the workers’ benefits,” said Hamilton.
3. Making the Case: Curbing Stock Buybacks
The rules that shape corporate America incentivize decision-making that has led to today’s high-profit, low-wage economy. Using Walmart as a case study, Roosevelt Senior Economist and Policy Counsel Lenore Palladino and Research Associate Adil Abdela examine what would happen if our country’s largest retailer—and the largest private employer of women and black and Latinx workers—prioritized workers over profit. Their findings show that if Walmart ended its stock buyback program and instead spent $10 billion on compensation, 1 million low-wage employees would see an hourly wage increase of over $5. Read the press release here.
4. A Major Regulatory Rollback
Congress sent the biggest rollback of banking rules since the Great Recession to the president’s desk this week, which he signed into law. “How quickly Congress forgets the lessons of the financial crisis,” tweeted Roosevelt Program Director Katy Milani. The legislation lifts the threshold of regulation standards from banks with $50 million in assets to those with $250 million and more. Though not considered Wall Street giants, the banks set to receive softer enforcement are still key players in today’s economy. “We know from the savings and loan crisis that it’s not always the biggest banks that screw up,” said Roosevelt Fellow Mike Konczal.
5. Union Power
Roosevelt’s Mike Konczal is back in The Nation with another groundbreaking article. In it, he covers a new study that challenges economic theory and shows that unions curb income inequality. As Konczal explains, we cannot dismiss the power of unions: “These results should end the simplistic tales in which education alone challenges the dominance of the 1 percent. If we want to change whom our economy works for, we must change who gets to exercise power. And this paper makes it clear: There is power in a union.”
What We’re Reading
For The New York Times, journalist Neil Irwin outlines how President Trump’s short-sighted trade decisions could hurt our economy in the long run. In rethinking global affairs, Roosevelt Fellow Jennifer Harris elevates why the rules matter: “Trade is not stuff of immovable structural forces of globalization. These are political choices that were made, and they could be unmade.”
On Tuesday, June 19, Roosevelt Fellow Julie Margetta Morgan will join The Pew Charitable Trusts for the launch of a new series focused on the student debt crisis. Alongside an expert panel moderated by MarketWatch’s Jillian Berman, Margetta Morgan will explain where we go from here and how policymakers can address this critical issue. Register here to attend in-person or to watch the live webcast.