RACHEL MARTIN, HOST:
It has been one year since the Republican-controlled Congress slashed corporate and personal tax rates. The promises and boasts at the time assured years of economic growth.
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PAUL RYAN: This is the kind of tax reform and tax cuts that get our economy growing to reach its potential. This gets us better wages, bigger paychecks.
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PRESIDENT DONALD TRUMP: And, ultimately, what does it mean? It means jobs - jobs, jobs, jobs.
MARTIN: That was President Trump, proceeded by outgoing House Speaker Paul Ryan. So how are things going today? The economy is still strong, with growth topping 4 percent in one quarter of 2018. And unemployment remains at a near 50-year low. But how much of that has to do with those tax cuts? Noel King put that question to Richard Rubin. He covers tax policy for The Wall Street Journal.
NOEL KING, BYLINE: A year after the tax cut took effect, where do we stand?
RICHARD RUBIN: We've gotten some of what we would expect and some of what the proponents had hoped for. I think we've seen some increased investment, but it decelerated some in the third quarter. We've seen unemployment continue to drop, but it was already on the way there. We've seen people have more money in their pockets. And so we've seen some economic growth, particularly in the short run, because people had money to spend as their paychecks got bigger in the first part of the year from the individual side of the tax cuts. And now what we're looking for to really see is, is that going to last? Is there going to be not just a one-time bump from people having money in their pockets and spending? But is there going to be the kind of sustained, prolonged economic boom with 3 percent growth year after year after year that the administration says is possible and that - most economists were pretty skeptical of the ability of this tax law and other administration policies to get the U.S. economy there.
KING: So some wait-and-see here.
RUBIN: Some of the facts are clear. There are bigger budget deficits. It was a large tax cut. And people will feel that on the individual side as they're filing their returns in the coming months. And one other thing I'd add is that companies are still trying to figure this out about what incentives they have. A lot of the pieces of this law are really complicated, particularly on international taxation. And Treasury Department has been putting out tons and tons of regulations over the course of 2018. And companies are still really trying to grapple with that to understand exactly what the new incentives are. And so what you've seen from companies so far is they've really - they've done a lot of share buybacks. We saw that early in the year and continuing throughout the year. Companies had free money, and they bought back their own shares. And we've seen some additional investment but not necessarily as much as the administration had hoped.
KING: You mentioned a trend that we've been seeing in which companies that got the tax break used some of the extra money that they had to buy back their stock. And that raised eyebrows. Why is that?
RUBIN: Well, it raised eyebrows 'cause it's not a direct investment. It's, you know - it really is trying to prop up the share price. It's trying to help investors. You know, you've seen some companies do dividends, as well. The counterarguments - that would be this - that if you get more money to investors, then companies that might want investment or might have the need for investment can get money from those investors. But the buybacks have become a political football, for sure, because the opponents of the tax law can easily point to them and say, look. The people who are benefiting here are really the shareholders.
KING: It's not the employees, which this was supposed to benefit.
RUBIN: I would say two things about that. One is that employees, for sure, were supposed to benefit from the corporate tax cuts. But that was going to take time. It was the causal chain that we just talked about of tax cut and then investment and then productivity growth and then hiring - was never going to be a one-year proposition. And then on top of that, of course, employees are getting tax cuts on the individual side, as well.
MARTIN: That was Richard Rubin of The Wall Street Journal talking with our co-host Noel King. Transcript provided by NPR, Copyright NPR.