GOLDMAN SACHS: There's a big misconception surrounding the impact of Trump's tax cuts

GOLDMAN SACHS: There's a big misconception surrounding the impact of Trump's tax cuts
Evan Vucci/AP

A Goldman Sachs analysis out last week suggests there are misconceptions around the impact of President Donald Trump's tax cuts.

Many on Wall Street and Capitol Hill have said the tax cuts are being spent on corporate stock buybacks and not capital expenditures.

Stock buybacks have been under attack on Capitol Hill, with some arguing companies should provide better benefits before repurchasing shares.

But a Goldman Sachs report found that US companies have sharply increased their cash outlays in growth investments after the tax reform.

President Donald Trump signed a sweeping tax-overhaul bill into law in late 2017, offering big tax rebates to corporate America in order to stimulate economic growth. Yet, American companies plowed billions of dollars into buybacks, causing some Washington lawmakers to worry that US businesses spent the gains merely on share repurchases rather than reinvestment in their core businesses.
Goldman Sachs released a report last week pushing back against that conclusion, saying that while stock buybacks did increase, so too did investments in growth.

Growth investments, which include capital expenditures as well as R&D spending, have accounted for the "largest share of US corporate cash outlays every year since at least 1990," and that conflicts with "the popular belief advanced by some politicians that buybacks dominate corporate spending," Goldman Sachs strategists led by David Kostin wrote.
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