Scott Grannis at Calafia Beach Pundit handicaps the Trump tax cut in Predictions for 2018:
But, argue the skeptics, won’t businesses just use their extra profits to buy back shares and increase their dividends, making the wealthy even wealthier without creating any new jobs? This oft-repeated allegation is an empty argument, because it ignores one key thing: what do those who receive the money from buybacks and dividends do with it?
In other words, what some companies do with their extra cash is immaterial. What matters is that tax reform has increased the marginal incentive to invest—for the entire economy—by reducing tax rates and by allowing the immediate expensing of capex. On the margin, investment now has become more attractive and more profitable in the US, and this will almost certainly result in more investment (some of which is likely to come from overseas firms deciding to relocate here), which in turn means more jobs, more productivity, and higher real incomes. As I explained a few years ago, productivity has been the missing ingredient in the current lackluster recovery, and very weak business investment is one reason that productivity has gone missing. A pickup in investment is bound to raise productivity, which is the ultimate driver of growth and prosperity.
Critics of the tax cuts do not trust the corporations to spend their cuts wisely. This is the tragic flaw of progressivism. We are supposed to trust the infinite wisdom and political interests of the state to spend our money, but always suspect the same money in private hands.
Our corporations are subject to competition. Taxes are a cost of goods sold and competition will not allow it to sit idle. They are also subject to the scrutiny of investment returns. Shareholder holds companies accountable for effective management. And they are also held accountable to their consumers. No such accountability exists in government.