Donald Trump

Nine days on from the publication of Emma Alberici’s analysis of the evidence for company tax cuts, and the Australian Financial Review is still conducting a vendetta against her, with yet another piece today by Aaron Patrick lobbing criticism. Yet again, Patrick failed to engage with any of the facts Alberici presented, preferring instead to focus on what cartoons Alberici had retweeted. Incisive stuff.

Meantime, the evidence that Donald Trump’s trillion-dollar tax handout is being used primarily for share buybacks and not for wage rises or additional investment continues to mount. In a note to clients, Goldman Sachs reported that share buybacks were up by 22% this year: “The buyback window has re-opened and firms are taking advantage of the recent correction… The Buyback Desk reported that last week was the most active week in its history.”

And how much additional investment had the tax cut spurred? Companies had raised guidance on re-investment by only 3%.

As one Forbes columnist noted, it’s not just about a surge in buybacks — investors are also winning from higher dividends. “The fuel for this buying power has come from the repatriation of profits held abroad and the tax form legislation… It is important to note that many of the companies that have major share repurchasing plans have also raised their quarterly cash dividend rates, adding to the surge in their stock prices. Goldman Sachs estimates that the cash returned to shareholders in 2018 from stock buybacks and dividends will grow to $1 trillion.”

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Thank goodness Australian CEOs and boards — especially those who have avoided paying tax in recent years — will resist going down the American path after a tax cut, and direct higher profits into more investment and wage rises, not share buybacks.

Oh… hang on.

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