A Million More Jobs – Gone?

In my column for the March/April issue, I wrote that the policy agenda of the Biden White House and Democrat-controlled Congress was providing what I thought to be a “challenging outlook for the business community in the months ahead.” As part of that challenge, I noted that the tax cuts provided by the Tax Cuts and Jobs Act of 2017 were likely to be a casualty of the new administration. That legislation, which was supported by AICC and manufacturers and organizations across the business community, was like rocket fuel for manufacturers in the U.S., prompting companies to create jobs, increase wages and benefits, and invest in local communities. In 2018, for example, manufacturers created 263,000 jobs—the best year for job creation in two decades.

That was then, and this is now. In early April, the Biden administration announced its nearly $2 trillion infrastructure plan. To help pay for it, the administration is considering reversing the tax cuts under the 2017 act as follows:

• Increasing the corporate tax rate from 21% to 28%.
• Reinstating the corporate minimum tax.
• Eliminating immediately the 100% bonus depreciation of depreciable assets, such as capital equipment, rather than phasing it out over the four-year period of 2023–2027.
• Repealing immediately the 20% deduction for certain pass-through business income, rather than allowing it to expire in 2025.
• Taxing capital gains as ordinary income for taxpayers with incomes above $1 million.
• Increasing the top individual tax rate from 37% to 39.6%, rather than allowing it to expire after 2025.

According to a study done by the National Association of Manufacturers (NAM), these tax increases under consideration in Congress would cost 1 million jobs in the two years following their implementation and an average loss of 600,000 jobs each year for the next decade. These increases would also, the study says, reduce GNP by hundreds of billions of dollars.

The study, conducted by the NAM in partnership with Rice University economists John W. Diamond and George R. Zodrow, found that repealing tax reform would reduce capital investment and lower wages and compensation in the long run, while undermining the economic recovery from COVID-19.

It is difficult to see this kind of reversal occurring, especially as we as an Association have worked for years to effect changes to the tax code that would help the U.S. manufacturing community become more globally competitive. After tax reform in 2017, manufacturers kept their promises to create jobs and invest in our communities—and now, we’re leading the country’s recovery from COVID-19. Raising taxes on American companies will hinder our recovery, and jobs will be lost.

Jay Timmons, president and CEO of NAM, agrees, saying, “Manufacturers can, and should, lead the economic recovery in the wake of the pandemic, but this study tells us quantitatively what manufacturers from coast to coast will tell you qualitatively: Increasing the tax burden on companies in America means fewer American jobs.”

As lawmakers consider reversing the 2017 corporate tax cuts, AICC will be mobilizing our members and our industry allies to help preserve what we worked toward for so many years. Watch your email inbox for how you can help in this fight. We’ll need everyone on the front lines!

Eric Elgin is owner of Oklahoma Interpak and Chair of AICC’s Government Affairs subcommittee. He can be reached at 918-687-1681 or eric@okinterpak.com.