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$1.5 trillion U.S. tax cut has no major impact on business capex plans: survey

Published 01/28/2019, 01:57 AM
Updated 01/28/2019, 01:57 AM
© Reuters. U.S. President Trump displays signbature after signing tax bill into law at the White House in Washington

© Reuters. U.S. President Trump displays signbature after signing tax bill into law at the White House in Washington

WASHINGTON (Reuters) - The Trump administration's $1.5 trillion cut tax package appeared to have no major impact on businesses' capital investment or hiring plans, according to a survey released a year after the biggest overhaul of the U.S. tax code in more than 30 years.

The National Association of Business Economics' (NABE) quarterly business conditions poll published on Monday found that while some companies reported accelerating investments because of lower corporate taxes, 84 percent of respondents said they had not changed plans. That compares to 81 percent in the previous survey published in October.

The White House had predicted that the massive fiscal stimulus package, marked by the reduction in the corporate tax rate to 21 percent from 35 percent, would boost business spending and job growth. The tax cuts came into effect in January 2018.

"A large majority of respondents, 84 percent, indicate that one year after its passage, the corporate tax reform has not caused their firms to change hiring or investment plans," said NABE President Kevin Swift.

The lower tax rates, however, had an impact in the goods producing sector, with 50 percent of respondents from that sector reporting increased investments at their companies, and 20 percent saying they redirected hiring and investments to the United States from abroad.

The NABE survey also suggested a further slowdown in business spending after moderating sharply in the third quarter of 2018. The survey's measure of capital spending fell in January to its lowest level since July 2017. Expectations for capital spending for the next three months also weakened.

"Fewer firms increased capital spending compared to the October survey responses, but the cutback appeared to be concentrated more in structures than in information and communication technology investments," said Swift, who is also chief economist at the American Chemistry Council.

© Reuters. U.S. President Trump displays signbature after signing tax bill into law at the White House in Washington

According to the survey, employment growth improved modestly in the fourth quarter of 2018 compared to the third quarter. Just over a third of respondents reported rising employment at their firms over the past three months, up from 31 percent in the October survey. The survey's forward-looking measure of employment slipped to 25 in January from 29 in October.

Latest comments

Any sane rational economist new the big economic impact, projected by the Trump administration, from the corporate tax cut was all political smoke and mirrors. Businesses wouldn't invest in new plant assets when their not currenly running anywhere near capacity. At best only a few would and most would pocket the additional profit for shareholder value and ignore the consumer maybe give the workers a little but that would be all.
time to reverse it back as the debate about the increase of national debt will probably force it.
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