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Business Leaders Attribute Economic Optimism in Part to Tax Cuts

Posted on March 9, 2018 by ZOE SAGALOW

Business leaders appear optimistic about increased earnings for their companies this year, but do not agree on how much those earnings will be the result of recent corporate tax changes, a new survey suggests.

In a survey of more than 800 members of the Association of International Certified Professional Accountants in decision-making roles, 50 percent said they anticipate their earnings will increase by at least 1 percent this year as a result of corporate tax changes in the Tax Cuts and Jobs Act (P.L. 115-97). But 36 percent of respondents said they don’t expect the corporate tax changes to increase or otherwise affect their earnings this year, and 5 percent said they expect a decrease in their earnings because of the TCJA. Nine percent said they were unsure. For this question, respondents from nonprofits were excluded.

The 818 respondents were primarily CEOs, CFOs, and controllers. The margin of error for the survey overall is less than 3 percentage points.

As for how companies are using any tax savings to benefit workers, 12 percent said they have raised workers’ salaries or hourly pay in anticipation of the law's effects, and 5 percent have given bonuses.

Almost three-quarters of respondents said their companies haven’t taken actions to benefit workers in light of the tax policy changes, and about two-thirds said their companies aren’t planning to in the next 12 months. Fifteen percent said they intend to increase employees’ pay. The rest mentioned other ways in which they already have given or plan to give additional benefits to employees.

Twenty-nine percent of respondents to a question about overall plans for any tax savings said they would likely spend more on business expansion and capital expenditures, and many of the 23 percent who responded “other” mentioned plans to invest, including in technology or product development. Seventeen percent said they anticipate using tax savings to pay down debt.

Business leaders have generally been optimistic about tax policy changes, both before and after the law was enacted; the question has more often been how they’ll spend their tax savings. In January, BlackRock CEO Larry Fink encouraged executives to make plans for using their tax savings to stave off investors focused on short-term solutions.

However, only a few members of an audience of business leaders at a November 2017 event with then-director of the National Economic Council, Gary Cohn, said they planned to increase their companies’ capital investment if the bill was enacted.