President Donald Trump has suggested a tax cut to reduce the unbelievable domestic income tax rate for corporations, including manufacturers, of 39 percent, to a competitive 15 percent.
In addition, Congress must lower the tax rate for the two-thirds of manufacturers that pay taxes at individual tax rates as pass-through entities. The pass-through rate on small business owners can be as high as 44 percent, according the National Association of Manufacturers. These small businesses are the backbone of our economy and create the majority of jobs.
A 2015 NAM study concluded that a reform package like this could add more than $12 trillion in Gross Domestic Product over 10 years, deliver more than 6.5 million jobs to the U.S. economy, and increase investment by more than $3.3 trillion, NAM Chairman David Farr said in a recent speech to the Economic Club of New York. (Farr is chairman and CEO of Emerson, a global manufacturer.)
Combined with overarching regulations, the burdensome tax rate makes it harder for manufacturers to meet intense competition for business and jobs. A tax rate of 39 percent – higher when you throw in state and local taxes – is a crushing obstacle when competing against manufacturers in the top 35 industrialized nations who enjoy a tax rate, on average, half that of the United States.
A tax cut will create jobs for Alabama manufacturers that compete internationally against lower tax rates.
This nation’s bountiful resources, which include willing investors and hard-working men and women (a recent study showed that Americans are among the hardest-working in the world), can be stifled by a non-competitive tax code.
The timing for tax reform is right. As the market is proving, businesses and individuals have been investing in anticipation of a tax cut and its effect on manufacturers, jobs, and our families’ standards of living.
William J. Canary is president and CEO of the Business Council of Alabama, the state’s exclusive representative of the National Association of Manufacturers and the U.S. Chamber of Commerce.