President Donald Trump rolled out his tax plan Sept. 29 at a conference sponsored by the National Association of Manufacturers (NAM). Restoring American manufacturing was a top priority for Trump from the time he announced his candidacy in 2015. Surrounded by manufacturing workers, he pointed to them and said, “These are the people who make America run!”
The NAM is a lobbying organization which represents 14,000 firms, most of which have 500 or fewer employees. The group conducted a research study in 2015 predicting that significant tax relief would result in the manufacturing sector adding 6.5 million jobs over a decade. The study indicated that the surge in manufacturing would add $12 Trillion to the American economy over 10 years and $3.3 Trillion in investment in new plants and equipment.
NAM Chief Executive Officer Jay Timmons is outspoken about the need for lower taxes to rekindle the industry. Timmons recently told CNN, “Our economy is stagnant, and we need to get beyond that if we want to succeed in the future. The goal for tax reform has to be to empower all Americans, to lift everyone up, and to strengthen our economy.”
The Trump tax reform plan is not yet backed by a bill in the House Ways and Means Committee, which is where all tax measures originate. It calls for lowering the corporate tax rate to 20 percent. America’s current 35 percent corporate tax rate is the highest in the industrialized world. The small business tax rate, which includes most manufacturers, would drop from 39.6 percent to 25 percent. There would also be an immediate tax deduction for investment in capital equipment. Trump told the NAM audience, “When we level the playing field, absolutely no one (foreign competitors) can beat us!”
Individual tax rates will be set at 12 percent, 25 percent and 35 percent. The income levels at which those rates will kick in have not yet been established. The standard deduction will be doubled to $12,000 for individuals and $24,000 for married couples. That means that a married couple with $70,000 in combined income would only be taxed on $46,000. There will also be tax credits added for child care and elder care.
Many existing personal income tax credits and deductions are likely to be eliminated. Among those are state income taxes and local property taxes, which will have the greatest impact in high-tax states like California, New York, New Jersey and Connecticut. It is not clear which corporate tax deductions and credits will be eliminated. Some corporations, like General Electric and Tesla, have so many tax breaks that they pay no federal income tax.
Trump distinguished himself from typical Republicans during the 2016 primary campaign by his rejection of the globalist economic policies favored by all Presidents since Ronald Reagan and his support for building more manufacturing plants in America. He said, “The phrase Made in the USA has not been used much in the last three decades. We’re going to create conditions where you (American manufacturers) can thrive, compete and grow.” He also noted how expanded American energy production, reduced regulatory burden, and re-negotiated trade deals will help American manufacturers
Manufacturing is clearly the top priority in the Trump Administration, and a more competitive tax policy is the pathway to expand American manufacturing. “When we grow American manufacturing,” Trump said, “we don’t only grow our jobs and wages, but we also grow America’s spirit.”
Congress needs to get to work and come up with a new tax policy which makes American businesses more competitive with the rest of the world and leaves American families with more disposable income. That should not be a partisan issue. President John Kennedy pushed for tax reductions under the belief that “a rising tide lifts all boats.” President Bill Clinton signed a capital gains tax cut, which led to the stock market boom of the late 1990s. President Trump reached out to all Americans, stating, “With your help, we will bring back our jobs, bring back our wealth, and bring back out American Dream!”
John Steinberger is the editor-in-chief of LowcountrySource.com. To contact him, email John@LowcountrySource.com.
