Is the Tax Law Already Boosting the Economy?

Is the Tax Law Already Boosting the Economy?


Republicans have been quick to take credit for pay hikes by Walmart and worker bonuses paid by dozens of companies including AT&T and American Airlines, claiming that the GOP tax bill is already paying off for workers. Democrats are skeptical, arguing that the bonuses are limited to a small number of companies and do little to boost worker pay in the long run, while shareholders are the real winners as companies announce share buybacks to boost the value of their stocks.

Politico’s Danny Vinik throws cold water on both sides, writing: “So who’s right? Most likely, neither. The truth is we just don’t know: It’s way too early to determine whether the law has had a significant impact on the economy. Perhaps Wal-Mart did raise its hourly wage due to the tax law, as it claimed. Or maybe it just needs to compete for workers in a labor market that has gotten increasingly competitive even before the law … These stories are anecdotes, great for PR but almost meaningless if you’re looking at the real impact of a sweeping, long-term reform.”

Vinik offers this advice for critics looking for results one way or another: “Ignore whatever both sides are claiming now. Big economic reforms take time to work their way through the economy, and it takes even longer for economists to analyze the resulting economic data … For now, though, we can be sure that the tax law isn’t having much of an effect on the broader economy—except to dramatically boost the number of dubious claims about the tax law.”