AT&T CFO John Stephens revealed a commitment to invest an additional $1 billion if US tax reforms pass would be possible, in part, because of a lift expected to occur at the operator’s enterprise segment.
Stephens told an investor conference lowering the corporate tax rate from 35 per cent to 20 per cent, as current legislation in the US Congress proposes, would spur investment from all types of businesses. Those organisations, he said, would need AT&T’s services.
“So that tax reform could generate significant opportunities for us to sell our business services,” he said, adding the boost to enterprises could also benefit AT&T’s consumer division because “it’ll give people more opportunities and more wages to buy our services.”
Alongside lowering AT&T’s tax rate, Stephens noted a provision in the bill allowing businesses to write-off capital expenses would also help increase free cash flow.
“Tax reform’s really important as a separate issue. But because of its importance, because of its impact we will be able to make an additional billion dollar investment in 2018 really focused on fibre.”
Stephens indicated he believes the odds of tax reform being approved by Congress are “better than 50/50”.
Still in the works
Just after Stephens made his comments on Thursday (16 November), the US House of Representatives passed its version of the tax overhaul bill. A separate version of the measure – which preserves the permanent corporate tax cut but makes changes to individual rates temporary – is still being debated in the Senate.
To become law, tax reform must be approved by both houses of Congress and signed by the President.
Whether a lower corporate tax rate will actually produce greater corporate investment levels remains up for debate. During a recent panel with White House economic advisor Gary Cohn hosted by The Wall Street Journal, many CEOs in the audience failed to raise their hands when asked if they would boost capital spending as a result of tax reform.
“Why aren’t the other hands up?” Cohn asked.
A video of the moment was posted on Twitter by MSNBC‘s Kyle Griffin:
Fascinating video from WSJ.
Question to CEOs: If the tax reform bill goes through, do you plan to increase your company’s capital investments?
[Just a couple hands are raised]
Gary Cohn: “Why aren’t the other hands up?” pic.twitter.com/Y5fIe7cv97
— Kyle Griffin (@kylegriffin1) November 15, 2017