WASHINGTON — Southern California biotech giant Amgen opened its first state-of-the-art factory in Singapore in 2014 and executives were preparing late last year to pick the spot for a second one.
Then they hit the pause button.
Congress was closing in on a sweeping $1.5 trillion tax bill with major benefits for businesses.
If the legislation passed, domestic locations would vault into stronger competition with sites abroad to land a factory that would cost as much as $300 million to build, said David Meline, Amgen’s chief financial officer.
“We were actually considering doing it in December and I said, ‘It looks like tax reform might occur,’” he recalled. “So we held up the decision for a couple of months with the possibility that ... the business case in the U.S. might be competitive with other global choices.”
The bill was approved and signed into law in the final days of 2017. This spring, Amgen announced it would build its new factory at its West Greenwich, R.I., campus at a cost of about $165 million.
Five months after the tax law went into effect — highlighted by a slash in the corporate rate to 21 percent from 35 percent — U.S. companies have ramped up their domestic spending.
A closely watched measure of business capital investment growth jumped to a 9.2 percent annual rate in the first quarter of the year, the best since 2014, according to the Commerce Department. Kevin Hassett, a top economic adviser to President Trump, boasted this week that “you can see capital spending skyrocketing just as we said it would.”
But many of those spending decisions were made months, if not years, before.
Although surveys show businesses are planning to do more spending, experts said that it’s unclear if the law will produce the big sustained boost to capital investment that its supporters have promised.
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Add in the potential for a global trade war, which would damp business spending, and it’s going to take a while to determine the tax bill’s effect.
“It’s still premature to conclude anything,” said Mark Zandi, chief economist at Moody’s Analytics. “I do expect to see some pickup in investment, but I don’t think we’re going to get this surge in investment.”
What’s more, stock buybacks among Standard & Poor’s 500 companies hit a record $187.2 billion in the first quarter, a 37 percent surge, according to a report from Howard Silverblatt, an analyst for S&P Dow Jones indexes. Among those companies was Amgen, which repurchased $10 billion in stock this year.
That spending reflects one certainty — U.S. businesses have more money because of the tax changes.