Corporations Would Surely Benefit From a Trump Tax Cut — But Probably at Their Workers' Expense

I did an interview with Sara Eisen and Scott Wapner on CNBC on Friday afternoon. During the interview Scott challenged my criticisms of the Trump administration's tax cut and asserted that such a cut would be sound policy for the economy by noting that Jamie Dimon is in favor of it. Scott noted that the JP Morgan chairman and chief executive recently said, “I would hire more workers if Trump's tax reform passes,” and Scott used that quote as evidence that the Trump administration is justified in claiming a corporate tax cut would benefit workers.

There is probably truth in what Dimon says. If my taxes were cut, then I would spend somewhat more, as (most) economic theories predict. Perhaps I would get an additional hour of tennis lessons a week, thereby increasing my employment of tennis professionals by 1/40th of a worker. But overall, I would likely keep the vast majority of any tax cut. The tennis pro would benefit a little, and my bank account would benefit enormously. Meanwhile, the public coffers, and thereby other taxpayers, would suffer.

I believe the same would be the case at JP Morgan, but perhaps Dimon can prove me wrong. Let me put some numbers on the proposition. Last year JP Morgan paid $9.8 billion in income taxes on $34.5 billion in pretax income, giving it an effective tax rate of 28.4 percent.  President Trump has advocated slashing the corporate tax rate by 57 percent. If JP Morgan's tax bill were to fall by 57 percent, the bank would save $5.6 billion a year. That would be enough to hire 44,800 people at the company's average compensation per employee of $125,000 a year.