DON'T BE FOOLED BY THE CONGRESS'S TAX PLAN

You will see in print and hear on TV various comments on all the wonderful things companies will do with congress's tax plan.  Don't be fooled as no one knows what will happen.

Here are some guesses by a group of CFOs as to what will happen.:

While nearly half of CFOs who responded remain unsure about how the passage of tax reform would play out for their companies in 2018, some are projecting immediate benefits.

More than 20 percent said tax reform will "most likely" lead to an increase in stock buybacks, followed by increased R&D spending and major M&A activity. A little more than 8 percent said tax reform would increase employee wages next year, while just over 4 percent said it is "most likely" to increase headcount.*  See the figure from the reference:*

The firm [CFRA] noted Apple held 94 percent of its $269 billion in cash balances overseas. CFRA predicts the company will repatriate as much as $200 billion back into the U.S. and use most of the proceeds to buy back stock.*

(Click on figure to enlarge)

Actually, many companies may decrease employment as they did after the repatriation of foreign profits in 2004.**  Notice from the figure more than 40% of the CFOs said they would buy back more stock if the 2017 tax-cut bill is enacted.  Not mentioned is the probability that companies will incrrese the executive's pay

Companies are rolling in money and don't need more to do any of the things shown in the figure.  If consumers get more money, they may pay down debt as households are "up to their eyeballs" in debt.  Household debt is at record levels.***  The wealthy probably will mostly buy Treasury bonds and foreign assets (chalets in Switzerlant, etc.).****

Don't be surprised if the results of the tax-cut bill are not anywhere as beneficial as is claimed.

* https://www.cnbc.com/2017/12/13/corporations-winner-in-tax-reform-not-the-middle-class-cfo-survey.html
https://www.cnbc.com/2017/12/14/here-are-25-companies-that-will-benefit-the-most-from-the-gop-tax-plan.html
** http://stopcontinentaldrift.blogspot.com/2017/11/corporate-taxes-cuts-unintended.html
http://stopcontinentaldrift.blogspot.com/2017/09/tax-holiday-for-repatriation-of.html
*** http://stopcontinentaldrift.blogspot.com/2017/11/household-debt-at-new-high.html
**** http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html