Gary Cohn is Donald Trump’s top economic advisor; while on stage this week at the Wall Street Journal’s CEO Council meeting, he called for a show of hands from CEOs who were planning to invest more if their tax bills were slashed in the new GOP tax plan.
Virtually no one raised their hands, prompting Cohn to look surprised and ask, “Why aren’t the other hands up?”
Cohn is pretty much the only person surprised here, though. US companies are enjoying record profits and have notably low levels of investment. Last summer, a Bank of America-Merrill Lynch survey found that the majority of executives at major US companies would use any tax windfalls to pay down debts and engage in financial engineering such as share buybacks.
The results of the Bank of America poll show a very similar pattern of corporate behavior to what happened after the 2004 tax repatriation holiday when U.S. companies spent the majority of their money coming back home from overseas on stock buybacks. It was a payday for Wall Street investors that generated little benefit to the middle class and wider economy.
The Trump White House says that it is going much further than President George W. Bush did in 2004 with the tax holiday. Trump’s tax plan also calls for the biggest reduction in the corporate tax rate: from 35 percent down to 20 percent. The plan also includes a provision to allow companies to write off the costs of any new capital purchases in the next five years.
1. Tax-overhaul backers say corporate rate cut will encourage investment by businesses
2. During #wsjceocouncil interview with Gary Cohn, WSJ asks CEOs to raise hands if they’ll boost investment if rates cut
3. Few CEOS raise hands
4. Cohn asks: “Why aren’t the other hands up?” pic.twitter.com/5PI60NlW0A
— Tim Hanrahan (@TimJHanrahan) November 14, 2017
‘Why aren’t the other hands up?’ A top Trump adviser’s startling response to CEOs not doing what he’d expect
[Heather Long/Washington Post]
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