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President Trump’s chief economic advisor, Gary Cohn, said in a recent interview that “big CEOs” are more excited than any other Americans about the Republicans’ tax proposals. That’s hardly surprising, since the GOP plan is like a multi-course Thanksgiving feast for corporate executives.
Cohn, a former Goldman Sachs president, is trying to get us to believe that by slashing the corporate tax rate, the Trump-GOP plan would lead to more and better U.S. jobs. In this video, I had the opportunity to respond to Cohn and explain why we should not let “big CEOs” gorge themselves at our expense.
The video draws from the Institute for Policy Studies Executive Excess report, which analyzed the job-creating performance of the 92 publicly held American corporations that reported a U.S. profit every year from 2008 through 2015 and paid an effective tax rate of less than 20 percent.
If the mantra of Gary Cohn and other Republicans were true, these firms would’ve been the nation’s biggest job creators. By exploiting loopholes in the existing federal tax code, all these firms have reduced their tax rates to the level that Republicans claim will stimulate job creation.
Instead we found that these 92 firms had a negative median job growth rate during the 2008-2015 period, compared to six percent job growth for the private sector as a whole. What did these corporations do with all their tax savings? Many of them used the money to buy back their stock, a financial maneuver that inflates executives’ stock-based pay.
One thing I wasn’t able to squeeze into the video is an important story about the role of CEOs in today’s tax fight and how it’s different from the last major tax legislation passed in 1986. Back then, big CEOs were also big players in the debate, but they cared much more about their individual income tax rate than the corporate rate. In fact, as IPS Associate Fellows Lee Price and Steve Quick explain in this commentary in TIME, corporate CEOs dropped their opposition to increases in corporate taxes in the 1986 bill when they found out they’d be getting a huge break on their personal taxes.
Why the turnaround? At that time, CEOs got paid differently than they do today. Most of their compensation then was in cash salary, whereas today it’s mostly in the form of stock-based pay, which would likely be inflated if corporate taxes are slashed.
If the GOP tax plan goes through, “big CEOs” will have even more reason to give thanks this year.
Seventy large U.S. firms spent $44 million lobbying for tax cuts last year -- four times as much as on immigration and other inclusion issues.