Trump signs tax reform (Photo by Chip Somodevilla/Getty Images)
U.S. President Donald Trump signs tax reform bill, Dec 22, 2017

The WIFM on Tax Cuts

Wondering “What’s In It for Me (WIFM) with federal tax cuts? Here’s DISC’s analysis on the growth opportunities the tax cuts open up for electrical distributors.

The recent tax cut is designed to encourage businesses to make profitable investments that will result in growth for the overall economy and drive it to reach its full employment potential. The tax cut frees up capital for investment that will generate profitability for companies and increase their productivity. DISC Corp. has the capability to measure what the tax cut does for the electrical industry — and more importantly, identify opportunities so distributors can position their resources to profitably grow their businesses.

Investment in industrial equipment. Our analysis begins with how this key economic driver for the distributor-served industrial market is expected to perform without the tax cut compared with how it behaves with a tax cut. That comparison in Chart 1 shows our outlook last November when it was not clear if a tax cut would be enacted, and what we are seeing now with the tax cut in our March 2018 analysis. Our March 2018 analysis shows that in the final two quarters of 2018 investment in industrial equipment takes off. A key reason is the expected impact of the tax cut. Our analysis demonstrates that investment in industrial equipment is a key driver of the distributor-served industrial market.

Distributor industrial sales. Are you positioned to share in the incremental growth in the distributor-served industrial market? As you can see in Chart 2, DISC forecasts that the expected impact of the tax cut will raise the distributor-served industrial market by 2 percentage points this year compared to if there had no tax cut. For 2019 we expect the distributor-served industrial market to gain 2 percentage points to +6.2% with the tax cut, compared to an increase of +4% without it. You can see the impact of the tax cuts on our 2019 quarterly forecast for Distributor Industrial Sales in Chart 3. And in Chart 4 we have DISC’s Total Industry Sales forecast for 2017-2020.                                                                                               

The author is president of DISC Corp., the industry’s leading provider of electrical sales forecasts. If you have any questions about DISC’s subscription-based data services, contact Isenstein at 203-799-3673 / [email protected]

 

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