The Tax Law, Corporate Profits and Jobs: Winners and Losers

The tax reform law passed in December 2017 was supposed to have increased corporate profits and promoted hiring and investment. We knew fairly quickly that the hiring didn’t happen. That’s why the Feds pushed money into road construction projects last year — deficit spending to create jobs and boost the economy before the midterm election.

However, in new analysis published by the Census Bureau, the expected corporate profits weren’t there either, at least not uniformly.(1)

Traditional manufacturing saw an uptick in profits in early 2018. However, the improvement deteriorated after the first quarter, as companies used the money for share buybacks and executive bonuses.


The information technology sector didn’t see any change in profits at all as a result of the law. There was a negative hit to profits the quarter before the law was passed, but the aftermath was a return to same-old-same-old with no discernible improvement.


There was some growth in manufacturing jobs in 2018, but analysts attribute that to recovery from the oil price shock of 2014 rather than to the tax bill.(2) The growth in jobs started before the bill was passed.

In fact there was a one-quarter jump in total non-farm employment, but the payroll report for 2018 is quite erratic. Most of the growth came in lower paying jobs in leisure and hospitality. Manufacturing jobs cratered in July, and after some recovery, have fallen each month since November.(3)

So the law didn’t accomplish its purported primary (profits) or secondary (jobs) objective, although it did help the wealthiest families.


  3. Bureau of Labor Statistics, “Current Employment Statistics Highlights, January 2019,” released 1 February 2019.

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