Companies Spent 140 Times More on Stock Buybacks Than Wage Increases in 2018 and Americans Should Be 'Outraged,' Say Bernie Sanders, Chuck Schumer

Bernie, Sanders, Chuck, Schumer, Tax, Plan,
Senator Bernie Sanders (left) is greeted by Sen. Chuck Schumer (right) after Sanders spoke at a press conference on Medicare benefits. Win McNamee/Getty Images

Senate Minority Leader Chuck Schumer and Vermont independent Bernie Sanders said that Americans should be "outraged" at profitable American companies "laying off workers while spending billions of dollars to boost their stock's value to further enrich the wealthy few."

In a New York Times op-ed published February 4, the pair proposed a new bill that would require companies to put their employees ahead of stock buybacks.

"Our bill will prohibit a corporation from buying back its own stock unless it invests in workers and communities first, including things like paying all workers at least $15 an hour, providing seven days of paid sick leave, and offering decent pensions and more reliable health benefits," the senators wrote, specifically citing Walmart and Harley-Davidson of being guilty of favoring shareholders over employees.

President Donald Trump and congressional Republicans passed their tax plan in 2017, lowering the corporate tax rate from 35 percent to 21 percent. "Tax reform is working," former Republican House Speaker Paul Ryan said last January. "Workers are coming home and telling their families they got a bonus, or they got a raise, or they got better benefits."

Trump's former chief economic adviser Gary Cohn also tried to explain how the money would trickle down. "We create wage inflation, which means the workers get paid more; the workers have more disposable income, the workers spend more. And we see the whole trickle-down through the economy, and that's good for the economy," he said on CNBC in November 2018.

But companies largely spent their savings on stock buybacks, benefiting shareholders instead of boosting wages. In 2018, U.S. companies spent a record $1 trillion buying back their own stock; that's about 140 times more than the $7.1 billion corporations gave their workers in bonuses or pay increases that year, according to Americans for Tax Fairness. Between November 2017 and November 2018, the wages for all workers rose less than 1 percent and did not keep up with inflation.

The buybacks also mean that "collectively, companies aren't investing in things like buildings and machinery—things that increase the overall economy's productivity," wrote Cowan Asset Management.

Because wealthy Americans tend to be larger shareholders than middle-income earners, they receive the vast benefit of the tax cuts. An analysis by Americans for Tax Fairness found that by 2027, when the tax law is fully implemented, 83 percent of all tax-cut benefits will go to the top 1 percent.

"Far too many workers have watched corporate executives cash in on corporate stock buybacks while they get handed a pink slip," wrote Schumer and Sanders.