If the Republican-controlled Congress and the Trump administration cut corporate taxes as they promised to, then a growing tech company would probably move lesser number of jobs overseas, a regional company would increase its spending on cybersecurity and the Texas-based chain of strip clubs would probably buy more clubs.
Some CFOs and executives already making plans for a tax windfall
Those were some of the uses that the U.S.-based small and medium size company said they would pursue if the present administration cut corporate taxes. The small firms pay the most taxes and would be the main beneficiaries of slash in corporate taxes. The 100 largest companies by market value in the benchmark Russell 2000 index of American mid and small-cap stocks and additional 50 in the same index with no analyst coverage were contacted by news site Reuters.
None even one of the 17 companies answered to the publishers’ queries in respect to “boosting their headcount.” The administration said that the slash in tax would pay for themselves largely by creating jobs and increasing more investment. Keith Cargill, chief executive at Dallas-based Texas Capital Bankshares Inc (TCBI.O), said “We want to be a company of the future, and technology is one of the key ingredients.”
Texas Capital Bankshares Inc is a bank with a market value of $4.2 billion. The CEO of the bank said that the tax cut would be a huge plus for earnings, only but with little impact on the workforce of the bank. Currently, according to Thomson Reuters data, the 2000 companies in the benchmark Russell 2000 index tend to pay the highest effective tax rates, which is an average of 31.9%. In addition to this, the data revealed that the 2000 companies would stand to gain a lot if corporate taxes are slashed from 35% to 20% as the Trump administration has proposed.
A tax cut would allow me to buy more clubs: RCI Hospitality Holdings Inc. CEO
The average effective tax rate is 28% for large companies in the S&P 500. It is not certain whether tax slash would take place and if it does, then in what form it will but the treasurers, Chief financial officers and executives have said that they have already begun to make plans for a tax windfall.
In an interview to Reuters, Neil Hennessy, the chief executive of Hennessy Advisors Inc., said that he was in acquisition mode and he would keep looking for targets in the event of a tax cut passing. (For your information: Hennessy Advisors Inc. is a Novato-California based mutual fund company.)
On August 9, Eric Scott Langan, the CEO of RCI Hospitality Holdings Inc. said to the analysts that a tax cut would let him acquire more clubs and boost the share price. He complained that the share price did not reflect the true organic growth of the company. (Another information: RCI Hospitality Holdings Inc. is one of the first firms to discuss a tax windfall publicly.)