News & Commentary

December 21, 2017

Both the House and Senate passed a tax reform bill, and President Trump is expected to sign the bill into law in the coming days. The plan provides significant tax cuts for businesses by slashing the corporate tax rate from 35% to 21%. The plan also increases the standard deduction, reduces some of the individual tax rates, and changes the tax treatment of pass-through entities. The Joint Committee on Taxation estimates that in 2018 all income groups will receive an average tax cut of 8%; however, by 2027, those earning less than $75,000 a year would bear a tax increase given the sunset of several of the provisions. For more on the tax bill’s impact on workers, please check out On Labor’s previous coverage.

Because the recently-passed tax bill sharply reduces corporate tax rates, some companies have already announced increases in worker pay. For example, AT&T announced it would give workers a $1,000 bonus while both Wells Fargo and Fifth Third Bancorp pledged to increase their company-wide minimum wages to $15.00 per hour. Moreover, Boeing planned to invest $300 million on training workers, upgrading facilities, and matching employee charitable contributions.

Joe Nocera in Bloomberg News argues that workers will not benefit from the tax plan’s provision allowing companies to repatriate profits stashed overseas at a 15.5% tax rate (even lower than the new 21% corporate tax rate). While Republicans argue that companies will invest this money in creating jobs and increasing worker pay, Nocera believes companies will simply buy back stock. Companies such as Pfizer, Oracle, and Home Depot have already announced greater investments in buying back stock. Nocera argues that stock buy backs merely artificially increase a company’s stock price thereby rewarding executives who own several shares while providing little to no benefit to workers.

Jared Bernstein at the Washington Post recently interviewed Heidi Sheirholz, an economist at the Economic Policy Institute, about a proposed Department of Labor (DOL) rule allowing companies to control the tips workers receive. Through this proposed rule, employers would be legally permitted to take any tips workers receive once those workers have already earned the minimum wage. DOL argues this rule will allow tips to be shared with the “back of the house workers” like dishwashers and cooks. Shierholz, on the other hand, believes that voluntary tip-sharing arrangements are already common and instead of sharing the tips, the employer will simply pocket the extra money, which could be nearly $5.8 billion.

Nearly 93% of Walt Disney World union members rejected a proposed contract that would have increased their wages by 50 cents an hour. Union members argued they deserved higher wages with some arguing that the minimum wage at Walt Disney World should be raised to $15.00 per hour. Walt Disney World countered that it already pays $2.00 more per hour than Florida’s minimum wage and that the rejected contract would have increased wages nearly 10% over two years.


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