How Will U.S. Companies Spend Their Tax Cut?

By Mark Roberti

The tax rate for businesses has been cut to 21 percent, from 39.1 percent, giving profitable firms a nice windfall; smart companies will invest in technologies such as RFID.

The U.S. Congress, as most of the world knows, recently slashed taxes for corporations earning money in the United States, from 39.1 percent down to 21 percent. This means that profitable companies will be able to keep more of their profits in 2018 and beyond. The big question, then, is what to do with those profits.

For many firms, the answer will be to buy back shares and/or distribute the money to shareholders as dividends. Others will use it to acquire businesses. There's nothing wrong with either of these approaches, but smart firms will invest a portion of the money in new technologies that will make them more efficient.

U.S. companies have, in fact, been investing less in information technology throughout the past 15 years. In 1980, they invested an amount equivalent to about 2.3 percent of the gross domestic product (GDP). That peaked in 2001, during the dot-com boom, at 4.7 percent. Since then, it has declined steadily to 3.5 percent.

Technology doesn't provide a permanent competitive advantage. Competitors can invest and catch up, but technology can enable a company to do what it does more efficiently and profitably.

Conventional retailers (those with actual stores) have been struggling to compete with online retailers. Investing in radio frequency identification technology would give them better inventory visibility, allow them to integrate their online and brick-and-mortar channel, improve customer service and compete more effectively.

Manufacturers would also benefit from investing in radio frequency identification. Most manufacturers replace approximately 7 percent of their parts bins and returnable transport items each year. RFID could reduce that figure and decrease capital expenditures for replacing bins each year. They could also track tools and many other physical assets that become lost, stolen or misplaced each year. In addition, manufactures could use the technology to audit 100 percent of outbound shipments and ensure on-time deliveries, binding themselves closer to key customers.

There are many ways in which RFID can be used to make companies more efficient and profitable. It's not the only technology in which companies can invest, of course, but it is a good way to spend the money they will get to keep thanks to the tax cut.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog or the Editor's Note archive.