CEOs optimistic on tax reform, making plans for more hiring

CEOs optimistic on tax reform, making plans for more hiring
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The nation’s top CEOs were more optimistic in the July-September quarter, with plans to boost hiring by the most in six years as Congress and the White House make tax reform a priority. 

The Business Roundtable CEO Economic Outlook Index — a composite of CEO projections for sales, capital spending and hiring over the next six months — rose to 94.5 in the third quarter, the highest level since the second quarter of 2014, and up from 93.9 in the spring.


"The survey results demonstrate that CEOs remain confident in the U.S. economy and that we must seize on the opportunity to continue to press for pro-growth economic policies that create jobs and fuel wage growth at all levels of the economy,” said Jamie Dimon, chairman and CEO of JPMorgan Chase & Co. and chairman of BRT.

“Our CEOs are committed and actively engaged in the effort to pass tax reform because they recognize that it will make us stronger as a country and create more opportunity for all Americans.”

The CEO index remains above 50, exceeding its historical average of 80.3, suggesting chief executives' continued confidence in the U.S. economy.

Plans for hiring jumped 9.9 points to 80.2 in the third quarter, reflecting continuing confidence among CEOs that excess regulations will be nixed and optimism that tax reform gets done within the next several months.

Despite lingering uncertainty about the contents of a tax overhaul, business leaders remain optimistic that legislation bill will eventually reach President Trump's desk. 

Joshua Bolten, BRT’s president and CEO, told reporters in a phone call on Tuesday, "I think there’s much more agreement than might appear on the surface and from the outside in the process.” 

There is complete agreement among the 200-plus CEOs of the Business Roundtable on the main principles of lowering the corporate tax rate and shifting to a territorial system.

House and Senate Republicans as well as the White House are seeing eye-to-eye on those central principles, Bolten said.

“Unlike the challenges that Congress faced on health care, there has not really been fundamental agreement among Republican members on the policy direction they want to take, we think there is alignment now on the policy direction that tax reform should take," he said. 

“There’s a lot of work to be done to sort out the details but if everyone is headed in the same direction there I think there is good reason for optimism that they can navigate all the shoals that stand between the current situation and success and with the strong support of the business community we hope of constituents they’ll get there."

While tax reform fires up in Congress, of the 140 CEOs who responded to the BRT survey, 122 (87 percent) identified the U.S. tax code as a disadvantage — including 85 CEOs who viewed it as a "substantial disadvantage."

Bolten warned that if tax reform is substantially delayed or doesn’t get done at all, more than half the CEOs said that they will take current plans for more hiring and capital spending off the books.

“So there’s a big opportunity on the table here for the administration and Congress," he said.

"There’s also a risk because there’s a real downside to the U.S. economy if they fail to get tax reform done in a timely fashion."

While business leaders are trying to spur fast action on taxes, Bolten said that doesn’t necessarily mean that an overhaul of the tax code has to happen by year’s end.

"If it slips early into next year that’s not optimal but that’s not a disaster because they’ve got a lot of stuff to work through on the Hill," he said.

One big piece is where businesses and Congress will aim for a new, lower corporate tax rate.

President Trump has said he would like to see the rate drop to 15 percent. 

Bolten didn't want to put a number on a rate but said “15 would be terrific, it would put us in line with some of our most competitive OECD countries with whom our businesses compete, but it doesn’t have to end up at 15 for BRT companies to be happy about it." 

Also in the latest report, expectations for sales dipped 7.4 to 116.9 for the third quarter, while plans for capital investment fell slightly to 86.4 from from 87.2.

The survey was done while hurricanes were battering Texas then Florida and the greater southeast region, which weighed on sales expectations.

CEOs project 2.1 percent economic growth this year, up 0.1 percent from their projection made in June.

This story was updated at 1 p.m.