REFILE-ANALYSIS-Old machines show why Trump tax breaks may not spark new company spending

Fri May 19, 2017 8:39pm GMT
 

(Corrects weight of Arconic press)

By Timothy Aeppel

CLEVELAND May 18 (Reuters) - Hanging on the wall of David Shippoli’s office at a sprawling factory here is his company’s annual scavenger award, a stuffed hyena head, given to the employee who finds the cheapest way to execute an investment project in the past year.

Shippoli, a manufacturing engineer at Dan T. Moore Co., a privately-held company which operates nine factories across Ohio and Indiana, won the prize for finding used machines that were a fraction of the cost of buying them new.

He is a fan of President Donald Trump’s policies and even propped a bright red “Make America Great Again” hat on the hyena during the campaign. But Shippoli embodies a mindset that exists across industrial America that will make it hard to boost business investment, even if the corporate tax breaks floated recently by the Trump administration come through.

“I don’t know why anyone would buy new equipment when there’s so much stuff out there that’s perfectly capable of doing the job,” he said.

Many U.S. companies emerged from the last recession extremely wary of spending on buildings and expensive new equipment, unless it was sure the returns would justify it.

Trump Administration officials forecast torrid economic growth on the back of the windfall U.S. companies would get if Trump’s plan to cut corporate tax rates and slash taxes on cash parked overseas became law. U.S. Treasury Secretary Steven Mnuchin and White House economic advisor Gary Cohn met on Wednesday with the full Senate Finance Committee about the administration's framework for tax reform.

CEOs certainly are enthusiastic about the prospect of tax reform. A recent survey by the Business Roundtable - a group representing major U.S. corporations - found more than eight out of ten said they thought tax reform would prompt companies to boost capital spending. Seventy-six percent said it would fuel hiring.   Continued...

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