The National Association of Manufacturers has released a policy report calling for tax reform as part of its strategy for promoting U.S. manufacturing. From the release announcing the report.
If there is one single issue that could have the greatest positive impact on manufacturing overall, tax reform is likely that issue.
As it stands today, our tax code is dragging down manufacturers and holding us back. We have the highest corporate tax rate in the world, and some small manufacturers that are structured as S-corporations and file as individuals pay tax rates over 40 percent, which is absurd.
Our goal needs to be making the U.S. the most attractive place to manufacture and invest, and we will make great strides in that direction through pro-growth tax reform.
Here’s what NAM is calling for:
For manufacturers, a tax reform plan must include:
- reduced tax rates on corporate and pass-through business income,
- a robust capital cost recovery system,
- strong R&D incentives and
- modern, competitive international tax rules.
The white paper concludes:
Manufacturers want the United States to be the best place in the world to manufacture and attract foreign direct investment, and there is no doubt that the U.S. tax code is a drag on economic growth and competitiveness. Business tax reform that will reduce the corporate tax rate to 25 percent or lower, lower rates for pass-through entities, shift to a modern territorial international tax system, strengthen R&D incentives and maintain a robust capital cost-recovery system will drive job creation.
These changes would result in a boost of more than $3.3 trillion in investments, more than $12 trillion in GDP and more than 6.5 million jobs to the U.S. economy. Making comprehensive business tax reform a near-term priority will promote manufacturing in America and enhance the global competitiveness of manufacturers in the United States well into the future.
Our focus at Opportunity Washington remains state public policy. But the NAM report underscores the importance of maintaining tax policies that stimulate investment and job creation. Our 2015 Priorities for Shared Prosperity includes a discussion of the state tax burden (we expect updates to the data soon, but there’s little reason to believe there’s been a significant shift from what we describe here).
The effective tax rate (the ratio of state and local business taxes to private-sector gross state product) on Washington businesses was 5.0 percent in FY 2013. Thirty-two other states had a lower effective business tax rate than Washington; the average effective tax rate was 4.7 percent.
Tax policies enacted here, including the aerospace tax incentive package, have been designed to attract and retain business. The NAM white paper provides good information on how tax policy influences economic growth; policymakers in both Washingtons may want to add it to their holiday reading lists.