Survey: Uncertainty hinders tax-cut impact

Businesses are more likely to make short-term adjustments than long-term adjustments based on recent tax cuts, according to a poll conducted by the Pennsylvania Institute of Certified Public Accountants.

Still, a majority of businesses aren’t doing anything yet, largely because of the regulatory uncertainty surrounding the cuts, which were enacted at the end of 2017.

While business leaders welcomed last year’s tax reform, there’s still uncertainty regarding its implementation.

“I think until the regulations come out, then businesses are taking more of a wait-and-see approach,” said Mike Colgan, CEO and executive director of the Philadelphia-based institute, known as PICPA. “The regulations are really the key here.”

PICPA polled 87 in-house corporate accountants between Feb. 19 and March 5. Most had more than five years of experience.

Signed into law in late December 2017, the Tax Cuts and Jobs Act slashed the corporate tax rate from 35 percent to 21 percent. It also offered to lower taxes for S Corporations and other pass-through businesses, whose profits are passed on as income to their owners. 

Slightly more than half of those surveyed by PICPA, 51 percent, said the reduction would not change the way they invest in their businesses, with some noting that tax policy alone doesn’t dictate their investment. Rather, they let the opportunities and customer demand determine how they will invest in their organizations.

“The tax cut is a factor, but it’s not something that’s going to change their overall strategy,” Colgan said.

Eleven percent indicated that they had not yet had the time to consider how the new tax law would affect their business.

The 38 percent who said the new tax rate would affect how they invest in their businesses provided an outlook on changes they plan to implement both in the short term – up to one year – and in the long term – two to five years out.

For the short term, the most popular answers were: make major capital investments, provide bonuses to existing employees, hire more employees and pay down debt.

Making major capital investments was the top choice in the long-term category, while hiring more employees and providing bonuses to existing employees also came in third and fourth, respectively.

Respondents rated giving extra money to shareholders via higher dividends as the No. 2 change they plan to implement in the next two to five years.

Shelby White
Shelby White covers banking and finance, law and Lancaster County for the Central Penn Business Journal. For tips, email her at swhite@cpbj.com.

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