[pktgen]

> The news has been full of dozens (maybe hundreds by now) of large and small companies using the tax change to increase employee wages and benefits.

No, there have been dozens or hundreds of companies claiming that tax cuts were responsible for employee compensation increases. Many of those were one-time bonuses, but the tax cuts are ongoing. In some cases where the benefits were ongoing (like Walmart's hourly pay increase), you'll find that they tend to coincide with the overall trend of state minimum wage increases. This is just PR: they're getting ahead of the trend and trying to attribute it to tax cuts rather than other forces.

Also, since employee compensation was tax-deductible even before the tax cut, taxes certainly weren't stopping companies from raising wages before the tax cut.

[bduerst]

Pretty much. Companies are using the tax cuts to signal goodwill to the market, but in reality the temporary increase in benefits is an expense coming from pre-tax income.

The tax cuts are causing increased employee benefits is a red herring.

[gowld]

No, tax deductions are not tax credits.

Suppose the company is targeting $100 net profit, and has $200 income available, before taxes and "bonus wages".

At 20% tax rate, the company can pay $75 in deductible wages, plus ($(200-75)0.2) $25 in tax

At 10% tax rate, the company can pay $89 in deductible wages, plus ($(200-89)0.1) = $11 in tax.

Lower taxes enables higher wages.

[bduerst]

That's not quite how it works. Publicly-traded companies don't reduce their net income using a tax cut, because their entire industry is getting the tax cut. The company's market price is tied to how their NI compares to the rest of their respective industry NI.

Stock repurchases are filed on the balance sheet, post taxes, which is why companies take the increase in net income but then use the extra cash to buy back stock. The former keeps the company competitive and the latter increases the stock price.

[jeremyt]

So, what evidence would you accept?