America's biggest companies are saying exactly what Republicans want to hear about the massive GOP tax law

pulse

March 30, 2018 6:26 PM

Many S&P 500 companies plan to spend their savings from the new tax law on investments in their firms — a big win for the GOP and President Donald Trump.

Republicans are banking on an economic boost from their massive new tax law as a part of their 2018 midterm strategy.
According to a new analysis, 84% of S&P 500 companies talked about the new tax law on their fourth-quarter earnings call.
Of those, 179 said they planned to invest savings in workers or new equipment, the analysis found.
This is good news for the GOP, as new investments could help drive economic growth.

Republicans have staked their 2018 fortunes in large part on their signature legislative achievement under President Donald Trump: a massive overhaul of the federal tax code, which they said would lead to an economic jolt from increased business investment.

A new analysis of public statements from some of the country's largest companies may back up that argument.

Conducted by the public-affairs firm Hamilton Place Strategies, the analysis of 452 fourth-quarter earnings calls from S&P 500 companies found that 84% brought up the tax law.

According to Hamilton Place's analysis, companies talked about how they would use these tax savings in five main ways:

Of the companies that talked about investments or returning money to shareholders, 45% told analysts they planned to do both, according to the analysis.

Thirty-nine percent spoke exclusively about investments, while 16% talked only about buybacks and dividends.

Looking at the types of investments the companies are planning, Hamilton Place found that most were focused on new equipment and expansion:

The way the firms are talking about deploying their savings should come as good news to Republicans.

Other data has not been as encouraging for the GOP. Polls have found that workers have still not noticed an increase in their paychecks. And capital-expenditure expectations have so far not picked up.

The analysis doesn't measure the relative allocation of the new savings. As Democrats have consistently argued, since the tax law's passage, the dollar amount of buybacks initiated by companies has far outpaced wage increases and one-time bonuses for workers.

On the other hand, substantive pay boosts and building new equipment takes a bit longer than buyback announcements.

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