In October 2018, Apple stock hit a new record high and among those shareholders there were 43 Republicans in Congress who together held around $1.5 million of the company’s shares.
Right before it hit that record high, Apple’s stock climbed 37 percent and we now know that those congressional Republicans had a hand in that jump, thanks to stock analysts. Legislation that those very Republicans had pushed through the 2017 Tax Cuts and Jobs Act saw nearly $150 BILLION in corporate tax savings in 2018 which resulted in a huge boom in stock prices.
Those corporate tax breaks meant slashed tax rates for big companies like Apple and hundreds of other stocks owned by Republican lawmakers and therefore they saw direct benefits, according to finds from the Center for Public Integrity.
As part of that bill, Republicans also approved tax cuts in 2017 that would benefit the wealthier members of Congress, including small corporations, real estate, etc. Meanwhile, the marketed the bill as one that would help the business and middle class.
Jeff Hauser, director of the Revolving Door Project at the Center for Economic and Policy Research, says, “It feels to me like a kleptocracy.”
This kind of congressional padding has been a focus of the 2020 presidential campaign with Democratic candidate Sen. Elizabeth Warren stating that her first priority as Commander in Chief would be to ensure the passing of an anti-corruption package that would see to it that members of Congress could not own individual stocks, bonds, or securities therefore they could not benefit from any tax laws they might be endorsing.
Warren said, in a September Medium post, “Under current law, members of Congress can trade stocks and then use their powerful positions to increase the value of those stocks and pad their own pockets.”
Another alarming effect that is just now coming into focus in the two years since the passage of the Trump tax act- it is most certainly not paying for itself and will likely add $1.9 trillion in debt to the nation, according to the Congressional Budget Office.
And although the plan cut taxes for people of all incomes, it overwhelmingly favored the wealthy and among the wealthy included? More than half of Congress who are listed as millionaires.
The tax law’s main feature is its corporate tax cut, from 35 percent to 21 percent, which according to Republican supporters at the time of passage, would result in better wages, factory expansions and thus, more jobs. But in the end, corporations exploited the plan, buying back stocks and raising dividends. By 2018, stock buybacks were over $1 trillion for the first time in history, according to investment research firm, TrimTabs. All this just saw the pockets of shareholders getting fatter.
Another letdown from the plan is that corporate investment is now lower than before the act passed despite promises to the contrary.
Some predicted this boost in stock prices. In 2017, Bryan Rich, CEO of Logic Fund Management, wrote that the this “will go right to the bottom line of companies — popping EPS [earnings per share] and driving stocks even higher.”
Just how much did it benefit those wealthy members of Congress? According to Roll Call’s semiannual assessment of Congress’s wealth, the 10 richest Republicans in Congress in 2017 who voted for the Trump tax act held more than $731 million in assets, with two-thirds of those being stocks, bonds, and mutual funds.
Rep. Mike Kelly (R-Pa.) initially voted for the tax cuts recently voted against a two year budget agreement that would add to the national debt and warned, “America is driving toward a fiscal cliff.”
Making bank overseas
Republican lawmakers also encouraged American corporations to repatriate money they had overseas, which also directly boosted their stock holdings because the tax law said that future foreign profits would not be taxed at high rates. Moreover, it said that any profits that had been previously earned and then kept abroad would only be taxed one time and no more than 15.5%.
What did that mean for big companies that big money Republicans were tied to? For one, Apple had $250 billion in overseas profits. One month after Donald Trump signed the tax bill into law, Apple said it would be bringing that cash home. Just a few months later, Apple said it would buy back $100 billion in stock and raise dividends. By the end of that week, Apple shares increased almost 9 percent. A year later, in April 2019, Apple announced another $75 billion in buybacks, thus resulting in another increase in share values and it is only climbing higher every day.
“They are passing tax laws and legislation that disproportionately favors the wealthy class… And that means they personally benefit from this type of legislation.
Pass-throughs are key
Another huge benefit that Republicans would see is a 20 percent deduction for income from “pass-through” businesses; this was so lucrative it was called the “crown jewel” of the act by the lobbying group The National Federation of Independent Businesses.
Pass-throughs are found in any industry, they pay no corporate taxes, and they are single-owner businesses, partnerships, limited liability companies, (known as LLCs) or special corporations called S-corps. Most real estate companies are organized as LLCs. Trump, for one, owns HUNDREDS of pass-throughs and 22 of the 47 members of the House and Senate committees involved in tax writing also had investments in pass-throughs.
Real estate benefits
Real estate was hugely favored in this tax plan. And Congressional members own a LOT of real estate. A review saw that 29 of 47 GOP committee members who were responsible for the tax bill have interests in real estate.
Ed Kleinbard, a former head of Congress’s Joint Committee on Taxation, said, “If you are a real estate developer, you never pay tax.”
Hauser, of the Revolving Door Project reminds us that “The budget deficit is going up so that people like Ron Johnson and Bob Corker can pay less in taxes.”
Warren’s anti-corruption plan
If Elizabeth Warren’s anti-corruption plan were in place, these conflicts probably wouldn’t have been such an issue. Much of the plan stems from her Anti-Corruption and Public Integrity Act from 2018. It would make it impossible for lawmakers to own or trade stocks, bonds, hedge funds, etc. Members would have to place their assets in “widely held investment vehicles” like mutual funds.
Under this bill, which hasn’t moved out of the Senate Finance Committee, members would also be forbidden to own commercial real estate although they would still be able to keep businesses which generated under $5 million.
It’s very difficult to get congresspeople to pass rules that make life exceedingly difficult for themselves.”
Beth Rotman, who is the money in politics and ethics director at government watchdog, Common Cause, says Warren’s plan faces a tough battle. She says, “It’s very difficult to get congresspeople to pass rules that make life exceedingly difficult for themselves.”
Rotman says, “Congress should have the same rules put on them that the executive branch has… The executive branch conflict of interest rules are stronger.”
Public Citizen’s Holman pointed out the amount of millionaires in Congress- over half of them- and said, “They are passing tax laws and legislation that disproportionately favors the wealthy class… And that means they personally benefit from this type of legislation.