Searching for smart, safe news you can TRUST?

Support safe, smart, REAL journalism. Sign up for our Axios AM & PM newsletters and get smarter, faster.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Searching for smart, safe news you can TRUST?

Support safe, smart, REAL journalism. Sign up for our Axios AM & PM newsletters and get smarter, faster.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Denver news in your inbox

Catch up on the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Des Moines news in your inbox

Catch up on the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Minneapolis-St. Paul news in your inbox

Catch up on the most important stories affecting your hometown with Axios Minneapolis-St. Paul

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tampa-St. Petersburg news in your inbox

Catch up on the most important stories affecting your hometown with Axios Tampa-St. Petersburg

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Photo: Getty Images

Hailed as a lifeline for American businesses, the 2017 Tax Cut and Jobs Act (TCJA) is starting to do more harm than good, new research finds.

Why it matters: After prioritizing debt reduction and business investment in the first half of 2018, companies have dramatically changed course. They are now spending more on share buybacks and dividends than they were paying in taxes before the tax cut, ratings agency Moody's finds.

  • "The TCJA is positive for cash flow but even an optimistic view of that savings pales in comparison to the jump in share buybacks in 2018 and [the savings] can be wiped out entirely by even a modest change in share buybacks," Christina Padgett, senior vice president at Moody's, tells Axios.
  • Note: Data shows companies are on pace to spend more on buybacks in 2019 than they did in 2018, exactly what the ratings agency is warning against.

Details: Moody's studied 100 non-financial U.S. companies with large cash holdings and found that in the second half of the year companies spent about half as much on debt payments as they had in the first quarter and increased buyback spending by more than 60%.

  • "We would prefer to see a reduction of debt or investment in core operating activities that could increase a company’s cash generation in the future," Padgett said.

What to watch: Moody's worries are confirmed in the latest U.S. GDP report, writes MarketWatch's Caroline Baum.

  • "The unexpected strength in the GDP report came from inventories, trade, and state and local government spending, not from business investment."
  • "Private final demand ... which should be the beneficiary of tax cuts and deregulation, rose an anemic 1.3%, the smallest increase in six years."

Why you'll hear about this again: New research also confirms that workers have seen de minimis benefit from the tax cut. Just Capital, a not-for-profit that tracks the Russell 1000 index, finds that workers' share of the tax rebate has been just 6%.

My thought bubble: While companies have long used share buybacks to pump their stock price and deliver for executives and shareholders, the TCJA is underpinning an increasingly distorted market and further increasing the divide between those at the top and everyone else.

Go deeper: Americans have gotten $0.01 more in bonuses since Trump's tax cuts

Go deeper

Updated 4 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Vaccines: Key information about the effective COVID-19 vaccines — Oxford and AstraZeneca's vaccine won't just go to rich countries.
  2. Health: U.S. coronavirus hospitalizations keep breaking recordsWhy we're numb to 250,000 deaths.
  3. World: England to impose stricter regional systemU.S. hotspots far outpacing Europe's — Portugal to ban domestic travel for national holidays.
  4. Economy: The biggest pandemic labor market drags.
  5. Sports: Coronavirus precautions leave college basketball schedule in flux.

Michigan board certifies Biden's win

Poll workers count absentee ballots in Detroit, Michigan on Nov. 4. Photo: Salwan Georges/The Washington Post via Getty Images

The Michigan Board of State Canvassers certified the state's election results on Monday, making President-elect Joe Biden's win there official and granting him the state's 16 electoral votes.

Why it matters: Republican Party leaders had unsuccessfully appealed to delay the official certification, amid the Trump campaign's failed legal challenges in key swing states.

Biden to nominate Janet Yellen as Treasury secretary

Photo: Photo by Alex Wong/Getty Images

President-elect Joe Biden is preparing to nominate former Fed Chair Janet Yellen as his Treasury Secretary, four people familiar with the matter tell Axios.

Why it matters: Yellen, 74, will bring instant economic celebrity to Biden’s team and, if confirmed, she will not only be the first female Treasury Secretary but also the first person to have held all three economic power positions in the federal government: the chair of Council of Economic Advisers, the chair of Federal Reserve and the Treasury Secretary.

Get Axios AM in your inbox

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!