Manufacturers haven’t been shy in pushing for pro-growth, pro-competitiveness and pro-manufacturing tax reform. We know firsthand how our current complicated and antiquated tax code, with the highest corporate tax rate among developed countries, makes it more difficult for manufacturers and other businesses in the United States to compete and succeed in a global economy. So our ears perk up when we hear the President mention tax reform, though tonight he touched only around the edges.
Previously, President Obama has called for a 28 percent tax rate for corporations – it is simply not enough. That wouldn’t even put US companies on a par with the rest of the developed countries whose average corporate tax rate is about 25 percent—and why should we be average? NAM supports a corporate tax rate of 25 percent or lower—with an accent on the lower.
We’re also more than a bit concerned about his talk of unspecified “loophole closers” or the more technical term, “base-broadening.” Manufacturers are pragmatic enough to recognize that broadening the income tax base will be part of any debate over lowering corporate tax rates, but policy makers need to consider the potential impact of expanding the tax base on economic growth and the competitiveness of capital-intensive industries like manufacturing. Some current tax rules are key to a strong manufacturing sector, and the benefits of these provisions should be maintained in a new system.
The NAM supports greater investment in infrastructure but the tax code isn’t the place to look for financing. The President’s proposal to repatriate overseas earnings as a means to direct additional investments in infrastructure is a very complicated financing tool that will make it even harder to achieve a modern international tax system that’s so important for U.S. manufacturers.
Like the President, manufacturers support an “all of the above” energy strategy. And we truly mean “all.” so we were concerned that the President again is suggesting we create winners and losers in the energy sector by increasing taxes on the oil and gas industry. It’s time to retire that tired, inaccurate talking point and acknowledge that manufacturers consume one-third of our nation’s energy ad know that higher taxes on some energy producers will translate into higher energy prices.
Finally, with his focus solely on corporate tax reform, the President totally ignores two-thirds of manufacturers—companies organized as “flow throughs,” like S corps and pay taxes at the individual level. These companies are a critical part of the manufacturing ecosystem and dealing them out of the tax reform effort could leave them with a higher tax bill.
Here’s the bottom line for us: a new system should not result in a net increase in manufacturers’ U.S. tax burden—a change that would undoubtedly derail efforts to enhance U.S. economic growth, investment and jobs. Unfortunately, the ideas the President outlined tonight are not good news for U.S. manufacturers.