March 22, 2021
As box manufacturers look ahead to the next four years, questions abound regarding the impact that a new presidential administration—and the regulations and legislation it may introduce—will have on domestic and international trade, the economy, wages, and of health and safety.
As this feature was being developed, the Biden administration was just days old. At this point, there are more unknowns than knowns. Plans and policies discussed on the campaign trail might never make it through the House and Senate. Priorities may need to shift as world events dictate. Not surprisingly, “It’s hard to know what the Biden administration will bring,” notes Eric Elgin, owner of Oklahoma Interpak.
But it is possible to make some educated guesses based on the recent history of Joe Biden’s political party, as well as his previous statements and actions. Mark Williams, president of Cauthorne Paper Co., believes, “The main that I expect will challenge all manufacturers under the Biden administration are higher taxes, regulatorylabor and employmentand trade.”
A Taxing Concern
One potential change that concerns manufacturers is a reduction of the tax breaks put in place by the previous administration. “We’re likely to see a reversal of the Trump tax cuts,” Elgin says. “That’s probably going to happen pretty quickly.”
Utah Paperbox President Steve Keyser agrees. “I think it’s probably fair to say that the new administration won’t be as friendly to business as the Trump administration was. But I don’t know that for a fact. At this point, Biden hasn’t been in office, and he hasn’t done anything yet. It’s impossible to speculate about the future.”
Even so, Keyser admits that the prospect of higher taxes does not overly concern him. Acknowledging that not every AICC member will share his opinion, he says, “Even if it costs the company money in higher taxes or fees—even if it costs me personally—it’s going to be worth it to me just to have a new administration in the White House.”
Williams observes that tax increases could have a wide-ranging impact on boxmakers. “Many AICC members are S corporations, so they are taxed on flow-through income from their businesses,” he says. “Higher taxes will slow reinvestment in businesses. Hopefully, rules on accelerated depreciation will continue, because those are excellent incentives for owners to purchase equipment to grow their business and benefit from a tax standpoint. Eventually, the tax man gets paid, but the accelerated depreciation laws help business owners postpone the tax somewhat while their businesses expand. The goal is to grow—and tax policy can have a significant impact on growth.”
Despite Biden’s earlier pronouncements, which included a plan to raise corporate taxes from 21% to 28%, some analysts now believe it may be premature to worry about a tax hike. “The immediate focus is more likely to be on pandemic stimulus spending and economic growth rather than major tax increases,” according to an early December survey by CNBC. Nearly two-thirds of the corporate financial officers who responded to that survey concluded that Biden is more likely to be neutral for business rather than negative or positive.
Environmental Justice
A significant element in Biden’s campaign platform was combining environmental responsibility with a need to end the kind of systemic racism that has put low-income neighborhoods and communities of color at higher risk from environmental pollutants. The resulting blend of environmental stewardship and social justice is called “environmental justice,” and it is “a core tenet of Biden’s climate plan,” his website states.
On the one hand, a renewed focus on the environment could help to bring public attention to the paperboard industry and its advantages in terms of recyclability and sustainability.
“I’m aware of a lot of talk about focusing on the environment again and reinstating some policies that promote recycling and sustainability and clean air,” Keyser says. “That’s a plus for the industry, because I think our industry has a wonderful sustainability story to tell. For example, Utah Paperbox has embraced sustainability. We have invested in solar, we’re in a LEED-certified building, and we provide a lot of electric-car charging stations for employees.”
Environmental stewardship is a major concern for Keyser, whose company is based in Salt Lake City. “Salt Lake City has a terrible pollution problem,” he says. “When I think about handing the planet over to my three kids, I don’t want them to say to me, ‘You did nothing about this problem.’ I believe in climate change. I believe in science. I am very happy to see an administration that is focused on the environment. I’m OK with regulations that help the environment, even though it may cost the company money.”
Increased costs for converters might not be the only price to pay. Elgin suggests that Biden’s approach may result in increased regulation that could potentially stifle paper manufacturers. “The biggest thing that would concern me [from the new administration] would be heavy regulation,” he says. “The paper industry in general uses a lot of energy. And the factories where my raw material comes from use a lot of energy. From talking with people over the years, one of the big concerns is the possibility of increased Environmental Protection Agency regulations on their paper mills.
“Obviously, some regulations are very important,” he continues. “You’ve got to be safe. You’ve got to be responsible about your waste. But I think sometimes, there are regulatory expectations for paper mills that are very difficult to meet. Paper is already difficult to get right now. If mills get shuttered due to increased regulation, that could hurt supply in the future.”
“I think there is the potential for overregulation,” Williams adds. “We need to do our part by staying in touch with our representatives and sharing facts about the excellent track record of our industry.”
Workforce and Wages
“President Biden is admittedly a ‘union’ guy,” Williams says, “so look for unions to be more active under the new administration.”
In fact, Biden’s campaign website highlights his stance: “Strong unions built the great American middle class. Everything that defines what it means to live a good life and know you can take care of your family—the 40-hour work week, paid leave, health care protections, a voice in your workplace—is because of workers who organized unions and fought for worker protections.” As a result, Biden’s plan is to strengthen public- and private-sector unions.
The elements of Biden’s plan seem tailored primarily to redress the actions of “bad actors” in the corporate space. For those well-run manufacturers that already maintain strong employer-employee relationships, there may be nothing that needs redressing.
“Most AICC member companies are nonunion and take great pride in providing nice-paying jobs and benefits to employees,” Williams points out. “The preference is not to have a third party negotiate these things.”
Biden has also expressed a desire to raise the federal minimum wage from $7.25 an hour to $15 an hour. Analysts are divided on the chances of such a proposal making it through the Senate, making this issue yet another case of wait-and-see. “I am in favor of some kind of plan to increase the minimum wage over time,” says Williams. “Most AICC members are happy to pay well above minimum wage for skilled operators. But we don’t want to pay $15 an hour for someone who lacks the skills—and determination—to succeed.”
Global Goals
At this point, few specifics are known regarding the Biden administration’s approach to international trade. On the campaign trail, Biden was reluctant to discuss too many details of his plans before taking office, stating that “there’s only one president at a time.” He has commented on his desire to join with U.S. allies, including the European Union, in a common front against China and its trade practices. However, he told the New York Times that he would not immediately remove the 25% tariffs that the previous administration imposed on China’s exports to the United States “or the Phase 1 agreement Trump inked with China that requires Beijing to purchase some $200 billion in additional U.S. goods and services during the period 2020 and 2021—which China has fallen significantly behind on,” the Times reported.
“[Biden] first wants to conduct a full review of the existing agreement with China and consult with our traditional allies in Asia and Europe,” the paper noted, going on to quote Biden as saying, “It’s going to be a major priority for me in the opening weeks of my presidency to try to get us back on the same page with our allies.”
Williams believes the new administration’s progress in this regard bears watching. “U.S. box manufacturers compete in a global economy and need policies that improve our competitiveness and our customers’ competitiveness,” he says. “There is a lot of uncertainty out there regarding trade. It would be nice to secure more fair free-trade agreements like the one we have with Canada and Mexico.”
Time Will Tell
It is impossible to know in these early days how the Biden administration will fare regarding industry-related legislation and regulation. Even so, the manufacturers we spoke to are generally positive about the near future.
“Looking at 2021, I’m optimistic,” Keyser says. “Honestly, when I think about any upcoming regulatory or legislative changes coming with the Biden administration, there isn’t anything at this point that concerns me.”
Elgin is also looking forward to what the future holds. “Overall, I’m an optimistic person, and I do hope for the best,” he says. “Biden has been pretty much in the middle, not swinging too far to the left or right. If his administration can stay in the middle, I think that’ll be best for everyone.”
Robert Bittner is a Michigan-based freelance journalist and a frequent BoxScore contributor.
