Watch CEOs admit they won’t actually invest more if tax reform passes

A telling and important moment.

An awkward — but extremely telling — moment arose yesterday at a Wall Street Journal “CEO Council” event that featured the Trump administration’s top economic policy hand, Gary Cohn, as a key speaker.

John Bussey, an associate editor with the Journal, asks the CEOs in the room, “If the tax reform bill goes through, do you plan to increase investment — your companies’ investment — capital investment,” and requests a show of hands. Only a few hands go up, leaving Cohn to ask sheepishly, “Why aren’t the other hands up?”

The reason few hands are raised is there’s little reason to believe that the kind of broad corporate income tax cut Republicans are pushing for will induce much new investment. A tax plan that was specifically designed to reduce taxation of new investments might do that. But most corporate profits are, of course, the result of activities undertaken in the past. So a broad cut in corporate tax rates is a windfall for what in tax policy jargon is called “old capital,” as well as for monopoly and quasi-monopoly rents and various other things that have nothing to do with incentivizing new investment.

The biggest immediate winners, in fact, would be big, established companies that are already highly profitable. Apple, for example, would get a huge tax cut even though the company’s gargantuan cash balance is all the proof in the world that the its investments are limited by Tim Cook’s beliefs about what Apple can usefully take on, not by a limited supply of cash or a lack of profitability.