Tax Cuts: Harley Davidson and its Dreams

Just came across some more articles on what the tax cut is doing for us. Harley Davidson, whose mission is “fulfilling dreams”, is setting aside its tax cut for the expense of outsourcing jobs to Thailand and giving money (and plus more) back to the shareholders via stock buybacks. Nothing in there about hiring more people or raising wages. The only people who will be benefitting will be the already supremely wealthy. I wonder what dreams those employees had?

Then there is this wonderful article about Walmart doing a $20 billion buyback. A left leaning think tank calculates that instead of doing a stock buyback, Walmart could have provided $5.66 wage increase from around $11 to $16.66. Walmart employs 1 million employees, many of whom earn below poverty level. Meanwhile, I imagine the world’s wealthiest family will make more money from this buyback, like they really needed more money.

Harley Davidson article

Walmart article

This is not healthy for society. Eventually society will stagnate because we will have two classes of people: the extremely wealthy and the extremely poor. Innovations do not come out of the extremely poor because they are trying to survive and often times do not have the health or the education to innovate. The extremely wealthy usually don’t innovate because there is no incentive: they are already in a good position and will focus more on preserving their good position or maybe indulge on the more hedonistic pursuits. I often think India is a good example of this. About a couple of decades ago I believe India had a bifurcated society with the wealthy at one end and the rest at the other end and no innovations coming out of the country. India didn’t start having a middle class until American companies came in and started investing in their people. Now India is starting to have thriving middle class and probably out of this middle class innovations will appear.

What is the answer to this? I have no idea but tax cuts are not it. Maybe taxes on the rich might be it. It might be a combination of taxes on the wealthy (as a return to society for putting people out of jobs) and laws allowing for the return of unions. We also need to replace Milton Friedman economic theory that the only job of corporations is to make profits for their shareholders. I think we need to expand the theory to include a more encompassing role of serving for the good of society. Serving just the shareholders is not enough and will ultimately be destructive to society.