The Trump administration’s $1.5 trillion tax cut package which came into effect in January last year appeared to have no major impact on capital investments and hiring plans of businesses, according to a recently released survey.
As reported in Reuters, the National Association of Business Economics (NABE) published its quarterly business conditions poll on Monday, almost a year after the biggest overhaul of the U.S. tax code in over 30 years.
In the survey, NABE found that due to lower corporate taxes, some organization reported increasing investments. On the other hand, 84% of respondents said they had changed plans that compares to 81% in an earlier survey published in October last year.
According to the Reuters’ news, by reducing the corporate tax rate from 35% to 21%, the White House had envisaged that the massive fiscal stimulus package would improve business spending as well as job growth.
Kevin Swift, President of NABE had said that a large majority of respondents, nearly 84% indicate the corporate tax reform – even after a year of its passage – has not caused their organizations to change investment or hiring plans.
However, the reduction in tax rates had a remarkable impact on the goods producing sector, as half of the respondents from that sector reported accelerated investments at their firms and 20% said they redirected investments and hiring to the United States abroad.
The NABE survey also recorded a further slowdown in business spending following its sharp decline in the third quarter last year. The measure of capital spending dropped to its lowest level in the beginning of this year since July 2018. Furthermore, the capital spending expectations for the next three months also weakened.
In comparison with the October survey responses, fewer companies increased their capital spending, but the cutback seem to be confined more in structures than investments in information and communication technology, Swift said, who is also the American Chemistry Council’s chief economist.
The new survey also reported that employment growth improved modestly in the fourth quarter of 2018 than the same year’s previous quarter. More than a third of the respondents indicated growing employment at their companies over the past three months, increased by 31% from the October survey. The forward-looking measure of employment by the new survey fell to 25 in January from 29 in October.