Slate Money – "The Where's My Tax Cut? Edition"

Date: May 19, 2018
Host: Felix Salmon
Guests: Anna Shymansky, Emily Peck, Catherine Rampell

Overview

This episode of Slate Money examines the real-world effects and political ramifications of the 2017 Republican tax cuts—asking "Where’s my tax cut?" The hosts dig into both the economic theory and practical outcomes behind the tax legislation, explore the longstanding disconnect between tax policy and public perception, and shine a spotlight on America’s nonprofit sector and its role within the tax-free economy. The conversation also spans topics like wage stagnation, full employment, labor power, and the structure (and oversight) of major nonprofit entities.

Main Discussion Points

1. Impact & Politics of the 2017 Tax Cuts

(Start – 11:50)

• Scope and Purpose:
  • Catherine Rampell explains the tax cuts were designed to satisfy Republican donors and supposedly boost midterm election prospects (02:01), but public enthusiasm remains limited outside wealthy beneficiaries.
• Polling vs. Reality:
  • Rampell notes public concern is more about tax fairness—corporations and the rich not paying their share—rather than individual tax rates (03:06).
    • Notable quote: "People care a lot more about the overall fairness of the system than what their actual liabilities are." – Catherine (03:28)
• Invisibility of Benefits:
  • Most Americans didn’t notice their withholding changed (05:03). Similar invisibility afflicted previous tax cuts under Obama and Bush.
    • Only 20% realized their taxes went down.
  • Minor boosts ($2–$40/week) are often erased by rising expenses, such as gas prices (06:38).
• Overpromising Wages and Outcomes:
  • Republicans’ public assurances of major financial benefits created a backlash: people see little change and feel misled (07:17).
    • Notable quote: "If you think back to that poll...Republicans are saying everybody's getting more money, but I'm not getting more money...that very over promising can actually have the reverse consequence." – Catherine (07:17)

2. Economic Theory vs. Reality: Corporate and Individual Tax Cuts

(08:29 – 11:50)

• Corporate Tax Justifications:
  • While a case existed for reducing the high corporate tax rate, the cut’s structure mainly favored shareholder returns instead of widespread investment or wage growth.
• Capital Investment Debate:
  • Some evidence for increased capital expenditure (up 24%), but skepticism persists about how long this will last and who benefits (09:58).
    • Anna: "There is some push from having a lot of additional cash...but...the idea that this is going to massively expand CapEx moving forward is a flawed argument." (10:29)
    • Many companies already sat on "mountains of cash"—the limitation was a lack of profitable opportunities, not access to capital.

3. Wages, "Full Employment," and Labor Market Dynamics

(11:50 – 26:18)

• Unemployment Stats and Puzzles:
  • U.S. unemployment rate is 3.9% with an unusual one-to-one ratio between job openings and job seekers (11:50).
  • Despite this, wage growth is tepid; possible explanations include:
    • Compositional shifts (retiring high-earners replaced by lower-wage workers)
    • Compensation moving to non-wage forms (bonuses, commissions, insurance)
    • Declining union power and rise of contract/gig work
• Labor Share of Income:
  • For decades, labor’s share of national income has fallen as capital’s share increased—partly because wage growth lags behind productivity gains (16:45).
• Job Quality and Bargaining Power:
  • The decline of manufacturing and rise of services (18:06), along with the weakening of unions, mean many new jobs offer worse pay and less security.
  • The emergence of "monopsony"—companies like Amazon dominating local labor markets—can stifle wage growth (18:23).
    • Debate persists: Some superstar firms pay more, but concentration often limits worker options.
  • Felix: "A labor force divided is a labor force that doesn't really have that bargaining power." (21:36)
• Changing Corporate Mindset:
  • Business culture now prioritizes low wage bills, unlike mid-century America or present-day Germany (22:11).
  • Contracting out labor depresses wages/advancement opportunities and increases inequality (22:46).
    • Catherine: "This whole kind of breakdown of the employer-employee relationship and what responsibility firms once felt...has kind of disappeared." (22:46)

4. Nonprofits, Charities & the Tax-Free Economy

(26:27 – 38:06)

• Slate 90 & Nonprofit Sector Exposé:
  • Felix introduces Slate’s investigation into America’s largest nonprofits (the "Slate 90") and questions what activities and organizations truly deserve tax-free status.
    • Major "charities" include sports leagues, hospitals, research institutes, and universities whose nonprofit status is debatable (28:27).
• Should Mega-Institutions Be Tax-Exempt?
  • Sports leagues like the Big Ten rake in billions while college coaches are effectively subsidized (29:01).
    • Emily: "The NCAA should not be making millions and millions and millions...tax free to entertain people while the players themselves don't get anything." (29:31)
  • Calculating the total cost to taxpayers is nearly impossible due to invisible or unmeasured local tax breaks (30:00).
  • Discussion centers on whether elite universities (e.g., Harvard Business School), or their profitable divisions, deserve nonprofit status (31:05–33:03).
• Charity, Fairness, and the Wealthy:
  • Rich donors mostly fund elite causes (universities, museums, hospitals), increasing the "rich people’s money stays in rich people neighborhoods" effect (34:05).
  • Most middle-class charitable giving (especially to churches) is not tax-advantaged due to the limited use of itemized deductions (36:07).
• Policy Complexity and Reform Challenges:
  • Some nonprofit activities are taxed, but the system is convoluted (37:32).
  • Any reform faces resistance ("running against charities is hard" – 38:06).

Notable Quotes & Memorable Moments

• On tax cut invisibility:
  "Nobody has noticed that their withholding fell in their paychecks...It's only like 20% of people realize that their taxes went down." – Catherine (05:03)
• On wage stagnation:
  "Unemployment has fallen a lot...So it's puzzling why we haven't seen more wage growth." – Catherine (13:09)
• On union decline and labor power:
  "A labor force divided is a labor force that doesn't really have that bargaining power." – Felix (21:36)
• On nonprofits as tax havens:
  "If you're...getting revenues from things like publishing Harvard Business Review or from selling television rights to basketball games...do we really need to subsidize that with the tax code?" – Felix (37:06)
• On elite charity:
  "The rich people money stays in the rich people neighborhoods. And it's not clear why the tax code should encourage that." – Felix (35:06)

Timestamps of Key Segments

• 00:00 – 02:44 — Episode introduction; panel introductions
• 02:44 – 11:50 — Do Americans feel the tax cut? Public perception, fairness, and the lack of visible impact
• 11:50 – 21:36 — Labor market: unemployment stats, wage stagnation, and why pay isn't rising
• 21:36 – 26:18 — Declining labor power, the rise of contracting and gig work, and shifting corporate culture
• 26:27 – 38:06 — Slate 90, the nonprofit economy, and the case for/against exemptions for mega charities, sports leagues, and universities
• 38:06 – 46:22 — Numbers round: declining fertility rates, teachers paying for supplies, hedge fund philanthropy, and the efficacy of financial literacy
• 46:23 – End — Closing notes and preview of bonus segment (Broadway economics)

Additional Featured Numbers & Facts (from "Numbers Round")

• 60.2 — U.S. fertility rate per 1,000 women (lowest ever) (38:29)
• 94% — U.S. teachers who pay for classroom supplies out of pocket (40:54)
• $3,000 — Cost of a week-long financial literacy camp for teens (41:59)
• $11 million — Hedge fund donations routed through the Robin Hood Foundation, some indirectly supporting protests against hedge funds (43:24)

Tone & Style

The conversation is lively, skeptical, empirically rigorous, and full of incisive (sometimes sardonic) humor. The panel isn’t shy about challenging conventional wisdom or each other’s perspectives, and the show freely blends high-level policy analysis with anecdotes and industry stories.

For Further Listening

Listeners intrigued by the nonprofit sector, labor economics, or the disconnect between policy design and outcomes will particularly appreciate this episode’s deep dives and candid exchanges.

End of summary.