The vast majority of US companies have not increased the recruitment or investment resulting from the Republican tax law, according to a study by the National Association of Business Economics.
84% of companies said they did not & # 39; t accelerate employment due to the 2017 Tax Law and the Jobs Act, which President Donald Trump praised as "a middle class bill and a job bill." Only 6 percent said they had more recruits because of the law, and 10 percent said they accelerated investment, according to the survey.
Trump and Republican lawmakers argued that tax breaks would increase jobs and investment. Treasury Secretary Steven Mnuchin said in October 2017 that tax reform would push GDP to a sustained level of 3 percent or more, leading to "literally millions and millions of jobs."
Democrats and some non-profit organizations predicted that tax cuts would not lead to significant job gains and only benefit the wealthy.
The study by the National Association for Business Economics shows that job gains have not been widespread, but concentrated in specific sectors.
Half of the survey respondents from companies in the "product-producing" sector ̵
The 2017 law changed the federal tax code to give businesses an incentive to get money they returned abroad to the United States. The tax penalty was so high that companies often chose to reinvest money abroad to avoid more taxes. It also cuts corporate tax from 35 to 21 percent, creating a business downturn, which the Republicans said companies would reinvest in their workers.
Instead, the companies put a lot of money in the direction of buying shares instead of investments. Buybacks hit a record $ 1 trillion in 2018, up almost 50 percent from the previous year.
Some experts claim repurchase is a good use of funds because if companies have too much money available, they are more likely to spend it on risky ventures. Others say, however, that share buy-backs are disproportionate for the benefit of business executives and wealthy shareholders.
The National Association for Business Economics study showed that some companies used the returned earnings for new investments in the US
Kevin Swift, CFO of the American Chemistry Council and one of the experts working on the report argued for that tax cuts combined with low interest rates made investments a smart business decision for product manufacturers.
Federal non-residential fixed income data, which includes corporate equipment and software purchases across all US companies, grew 1.47 percent and 1.15 percent, respectively, in the first two quarters of 2018. The gains were slightly higher than in the same quarter a year earlier. Investments rose 1.20 percent and 0.94 percent in the first and second quarters of 2017, according to the Bureau of Economic Analysis.
"It worked even better than we expected when we drafted it," said Stephen Moore, who served as financial adviser to the 2016 Trump campaign.
Moore also claimed the National Association for Business Economics & # 39; questionnaires were too narrow because business leaders rarely allocate their decisions to a single factor.
"But when you make it economically attractive to buy a new truck or invest more in a new company and reduce taxes on it, if you cut costs, you will have a greater demand for these things," Moore says.
Yet, the study's findings show that most companies prioritize stockpiling over making new investments and hiring more workers.
And there is growing evidence that the positive effects of the tax law are being wiped out.
Non-residential fixed assets rose only 0.35 percent in the third quarter, down from the 1.15 percent increase over the previous three months.  In the first half of 2018, the tax cuts also seemed to increase the country's GDP, which the Republicans say would slow down the broader economy and lead to more job creation.
According to the congressional budget office, growth is expected to slow this year. CBO reported today that it expects the US economy to expand 2.3 percent by 2019, down from 3.1 percent last year. The government report attributed the decline to the declining effects of the tax law and an expected fall in federal spending at the end of the year.
It is also possible that the effects of the tax cuts on the commodity-producing sector, which seems to have seen the greatest benefits, could "diminish" in 2019 due to the Trump administration's trade policy, says Sara Rutledge, CEO of StratoDem Analytics, which also worked on the report.
Seventy-seven percent of all respondents said that uncertainty over US commercial policy does not affect their businesses. The "goods-producing" companies were the exception.
About 36 percent of mining, coal, and other "commodity-producing" companies said they were raising prices in response to US trade policy, 27 percent delaying investment, and 9 percent said they were delaying hiring, the survey said. Only 27 percent said there was no change in employment or investment due to trade problems.
Tax cuts aside, the National Association for Business Economics studies found companies gently optimistic for the coming year. Most respondents said they expect economic growth to continue at a rate of between 2 and 3 percent by the end of 2019, although the number was lower than in previous months.