Capital investment, hiring plans mostly unchanged despite tax cuts: NABE survey

The Trump administration’s overhaul of the U.S. tax code has done little to spur major corporations to increase capital investments or hiring plans, according to a survey by the National Association For Business Economics.

Officially implemented in January 2018, the $1.5 trillion tax reform package reduced the corporate tax rate to 21 percent from 35 percent and changed the way the government taxes businesses that operate overseas. The package initially prompted a wave of stock buybacks and one-time employee bonuses.

However, a survey of 106 NABE members revealed that 84 percent of respondents said their companies had not changed their capex plans due to tax reform. That figure rose slightly compared to results of NABE’s last survey from October, when 81 percent of economists noted no change to plans for capital investment or hiring.

“After a year of robust capital spending, business investment has cooled a bit, and expectations for the next three months slackened similarly,” said NABE President Kevin Swift. “Indeed, the capex story is really a tale of two cities. 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.”

The survey found that tax reform has triggered the largest change in the goods producing sector, where 50 percent of respondents noted accelerated investments and 10 percent noted accelerated hiring. A further 20 percent of respondents said their companies in the sector said their companies had redirected hiring and investments to the U.S.

The survey’s results also suggested optimism about the state of the U.S. economy despite ongoing international trade concerns and a record-setting government shutdown. The poll found that 64 percent of economists expected the U.S. economy to expand in 2019. Another year of growth would mark the longest period of U.S. economic expansion on record.

However, the survey also suggests that U.S. economic growth has slowed. Some two-thirds of the poll’s respondents said they expect economic growth to exceed 2 percent, down from 90 percent of respondents from the NABE’s previous survey.

“Additionally, fewer survey respondents report rising sales at their firms in the fourth quarter of 2018 compared to the third quarter,” NABE Business Conditions Survey Chair Sam Kyei said in a statement. “Profit margin increases became significantly less widespread in the fourth quarter of 2018.”

Ongoing trade disputes between the Trump administration and counterparts in China and the European Union have weighed on the U.S. economy in recent months. A lengthy government shutdown, which ended earlier this month, further stoked concerns that the economy’s 10-year expansion could soon come to an end.


The Associated Press contributed to this report.