Manufacturers must be heard in the tax reform debate
February 4, 2016
As originally seen in the Washington Examiner.
By Michael Shue, Senior Vice President, Client Relations
Key tax-extenders of the omnibus spending bill are now permanent, thanks to the president signing it into law during the last weeks of 2015. The included tax package — the Protecting Americans from Tax Hikes Act of 2015 — lays the foundation on which to have a deeper national conversation on comprehensive tax reform in 2016.
The good news is that American manufacturers have a greater degree of certainty for planning budgets and allocating financial resources. What’s more, manufacturers have a compelling case for building on the spirit of reform to reduce the burden on American businesses. But they will have to navigate a crowded debate, particularly as the presidential race heats up, with differing opinions and priorities.
Manufacturing companies have a lot to gain from making their voices heard in a nationwide discussion of corporate tax reform. With the world’s highest corporate rate and a complicated tax code, businesses explore complicated tax strategies to remain globally competitive. The 2016 race to the White House will take center stage in this year’s discussion of comprehensive tax reform, shaping the future environment for American businesses and our national economic prospects. Informed action will be critical for manufacturers hoping to shape the bigger picture for the next administration and Congress.
Presidential candidates, to varying degrees, have expressed their initial plans for reform with varying outcomes for manufacturers. If one of the GOP hopefuls assumes the presidency, manufacturers can expect to see even more simplification beyond the scope of the recently passed tax-extenders. Ted Cruz imagines an America with “exports and manufacturing jobs booming” — a feat he’ll accomplish by eliminating the corporate income tax and replacing it with a flat business tax of 16 percent. Before suspending his campaign, Marco Rubio had promised to cut the top corporate rate to 25 percent (currently sitting at 35 percent), while Jeb Bush would have capped it at 20 percent.
Democratic front-runner Hillary Clinton has been more reserved when sharing her plans for tax reform. Operating in a “play-it-safe” mode, her tax agenda seems to resemble President Obama’s. But it also leaves room for compromise, assuming she wins the Democratic nomination. As she advocates for reducing tax burdens on “hard-working Americans,” though, it is unclear who will pick up the slack, potentially impeding economic growth on the American business front.
Regardless of who wins the November presidential election, future legislators and presidents are likely to face tough choices about taxes and spending as the nation’s debt continues to grow and sustain deficits. As we look toward national prosperity, economic expansion and innovation, we will require engagement and productive partnership between legislators, businesses and their stakeholders on comprehensive tax reform.
Building on the spirit of recent reforms, it is critical for companies to educate and mobilize their stakeholders, such as their current employees, retirees, and local communities, to ensure legislators craft smart tax policies. The manufacturing industry contributes to an estimated 18.5 million American jobs and $2.17 trillion to the U.S. economy. While there is bipartisan agreement that manufacturing is critical to a healthy middle class, manufacturers continue to face substantial explicit and implicit tax and regulatory burdens. Through a successful employee and stakeholder grassroots program, players in the manufacturing industry can create a positive dialogue centered on the vital role that manufacturing plays and how potential changes to state and federal policies would affect an industry critical to a stronger, more stable middle class.
2016 presents an opportunity for our nation to open a national dialogue about where and how our country is progressing. To ensure the hard-fought tax measures of 2015 remain permanent, and to lay the groundwork for comprehensive reform and economic growth, America needs the voices of its manufacturers to be heard.