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The Trump tax cut bonus boom never materialized

When President Donald Trump signed his signature tax code overhaul in December 2017, he loudly touted the benefits it would provide working Americans — among them, economic growth, higher wages, lower taxes, and bonuses.

Those heady promises have largely gone unfulfilled. Current economic growth no higher than it it would have been without the tax cuts. Wages continue to stagnate. And the largest share of the tax cuts’ largesse has been taken by wealthy executives and shareholders.

That left the possibility of generous bonuses as the one benefit that working people might still claim from the tax bill.

Bad news, then: The bonus boom never materialized.

It was a promise made from the outset. The day he signed his tax bill, Trump tweeted that bonuses were an unheard-of “source of ‘love’” from companies, “and now it is all the rage.”

This continued into 2018.

“Millions of Americans are receiving large bonuses and bigger paychecks than they’ve ever received because they have so much money that they didn’t even know they were making,” Trump told a Michigan rally in April 2018. “You see what’s happened as of February 1, and right after the cuts, the corporations gave massive bonuses and they continue.”

However, according to the most recent survey from the Bureau of Labor Statistics (BLS), worker bonuses have dropped 24% since the tax cuts went into effect. This is the largest such drop in that business cost category since 2005.

The data, in the BLS’s Employer Costs for Employee Compensation report, show that private sector employees received $0.96 per hour in bonuses in the first quarter of 2018, which dropped to $0.73 in the first quarter of 2019. That’s a drop from bonuses being a 2.8 percent share of an employee’s total compensation to a 2.1 percent share.

The first four columns show what private sector employers have paid in bonuses per hour of work in each quarter. The last four columns show that as a percentage of an employee's paycheck. (CREDIT: Bureau of Labor Statistics)
The first four columns show what private sector employers have paid in bonuses per hour of work in each quarter. The last four columns show that as a percentage of an employee’s paycheck. (CREDIT: Bureau of Labor Statistics)

Overall, the trend has seen bonuses slowly plateauing before and during the Great Recession, before rising sharply starting in late 2014 as the economy improved. After a crest in early 2018, immediately following the passage of the tax cut bill, bonuses dropped.

When the bill was signed, some large companies began announcing “tax reform bonuses” (as the bill’s advocates dubbed them) with the White House eagerly promoting them as a sign that the tax bill was not merely a corporate giveaway. But a ThinkProgress analysis of the amount of bonuses handed out ($1.38 billion) versus how much corporations received in tax cuts showed ($1 trillion) showed how little of the savings was passed on to workers.

Credit: Adam Peck
Credit: Adam Peck

Trump has not mentioned bonuses since July of 2018.

Bonuses are a one-time expenditure, and therefore far less consequential to both workers’ checkbooks and corporations’ balance sheets. Wages are another matter. If corporations, which saw their tax rates drop from 35% to 21%, were really passing along that money to their workers, they would hand out big raises. Wage growth would skyrocket. But that has not happened.

According to the Economic Policy Institute’s Nominal Wage Tracker, growth has been far below target. After a year of flat wage growth in 2017, there was a small bump in 2018, which looks to be an anomaly, because 2019 has seen wage growth drop.

The focus of the tax cut bill was cutting corporate tax rates — corporate rates got dropped permanently, while the individual income tax rate drops are only temporary and set to rise back to normal after 10 years.

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