The record corporate buybacks so far in 2018 have sparked a growing political debate over the fate of the huge tax cuts passed by Republicans in December. As many critics of the tax overhaul predicted, much of the windfall is ending up in shareholders' pockets, though the legislation's supporters insist that worker bonuses are piling up and wage increases are on the way, eventually, as companies begin to invest more in improving their businesses.
On Wednesday, the Ohio bank Fifth Third highlighted the tension in the debate when it announced it would buy back up to 100 million of its own shares at a cost of roughly $3 billion. This followed an earlier announcement, publicized by President Trump last month, that the bank would be raising wages for 3,000 hourly workers and paying one-time bonuses to 13,500 workers, at a cost estimated by The Washington Post of about $48 million.
What’s happening at Fifth Third is emblematic of what’s happening more broadly. According to a new analysis by The Wall Street Journal of S&P 500 companies, “Share buybacks announced by large U.S. companies have exceeded $200 billion in the past three months, more than double the prior year.” By comparison, about four million workers have received bonuses, the Journal writes, putting “the total value at a few billion dollars of income, well below announced buybacks.”
JUST Capital, a nonprofit established by hedge fund manager Paul Tudor Jones that surveys Americans about their economic preferences, released an analysis Wednesday that offers more evidence for the trend. The group looked at the Russell 1000 companies, which are expected to receive roughly $150 billion in tax cuts, concluding that shareholders would receive 58 percent of the windfall:
According to JUST Capital, this divvying up of the spoils runs contrary to what most Americans would like to see from businesses. The firm’s polls show that the number one priority Americans have when it comes to businesses is the well-being of workers. Management and shareholders come last.