As millions of Americans face the first tax day filing deadline completely covered under the new tax reform law, U.S. manufacturers are continuing to see sustained growth due to the overhauled tax code nearly a year and a half after its passage.
Economic data since tax reform was signed into law points to a stunning and quick turnaround. The U.S. economy grew 3.1% from the fourth quarter of 2017, when tax reform was signed into law, to the fourth quarter of 2018, the fastest year-over-year growth in nearly fifteen years. Moreover, business investment spiked 6.9% in 2018, the strongest reading in five years.
The enactment of tax reform, which replaced an outdated system with a more competitive tax code, served as rocket fuel for the U.S. manufacturing industry in particular. U.S. manufacturers created more than a quarter million jobs in 2018, the best year for job creation since 1997, and manufacturing production skyrocketed to the highest level in a decade. A National Association of Manufacturers (NAM) industry-wide survey from April 2018 found that 86% of manufacturers were already planning to increase investments due to the changes and more than two thirds reported plans to increase wages and benefits.
According to an NAM Outlook survey released in December, last year was the most optimistic year for manufacturers on record. A similar survey from March found the industry has enjoyed nine consecutive quarters of record optimism, largely due to the tax law.
“Tax reform sparked the robust manufacturing job growth manufacturers predicted,” NAM Chief Economist Chad Moutray said.
Through its “Keeping Our Promise” campaign, the NAM has reported on dozens of stories of small and large manufacturers across America who have raised wages, increased hiring, and invested in new production due to the tax law.
“Tax reform has provided a tremendous boost to the men and women who make things in America,” NAM Vice President of Tax and Domestic Economic Policy Chris Netram said. “Manufacturers are enjoying historic levels of business optimism and have created jobs at the fastest pace in decades.”
However, while tax reform has sparked a surge in U.S. manufacturing, Netram also warned that efforts by politicians in Washington to roll back the law would directly threaten the past year and a half of record growth.
Indeed, the March 2019 NAM survey found that, when asked about the impact of Congress potentially repealing pro-growth provisions in the tax law, two-thirds of respondents would consider reducing capital investments in the United States, and 54% and 62% said it might force them to have to scale back employment and wages and bonuses, respectively.
“It’s clear that adopting a more competitive tax system has boosted the industry,” Netram said. “It’s also clear that rolling back the benefits of tax reform would make it more difficult to further grow our thriving American manufacturing sector.”