The Limits of Raising Taxes as a ‘Manufacturing Strategy’

By August 3, 2010Economy, Taxation this morning posted a lengthy and interesting report on the Congressional politics of manufacturing, “New Democratic strategy for creating jobs focuses on a boost in manufacturing“:

President Obama and congressional Democrats — out of options for another quick shot of stimulus spending to revive the sluggish economy — are shifting toward a longer-term strategy that promises to tackle persistently high unemployment by engineering a renaissance in American manufacturing.

That approach, heralded by Obama last week in Detroit and sketched out in a memo to House Democrats as they headed home for the August break, is still evolving and so far focuses primarily on raising taxes on multinational corporations that Democrats accuse of shipping jobs overseas.

We lost track of how many attempts there were on Capitol Hill last week to try to use billions of dollars of new taxes on foreign earnings to pay for other federal spending.

As several of the National Association of Manufacturers “Key Vote” letters (here and here) noted:

An estimated 22 million people in the United States – more than 19 percent of the private sector workforce and 53 percent of all manufacturing employees – are employed by companies with operations overseas. Manufacturers feel strongly that imposing…tax increases on these companies …will jeopardize the jobs of American manufacturing employees and stifle our fragile economy.

Some of the proposed tax increases, which are mischaracterized as closing tax loopholes, actually represent significant changes to pro-growth tax policy supported by Congress and the Administration.

It’s just not a good approach, making the United States a less attractive place to do business.

Anyway, as Crocodile Dundee might say about raising taxes, “That’s not a strategy. Now, THAT’s a strategy.”

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