8 ms·
After years and years of pushing American manufacturing overseas, suddenly Congress wants to entice them back with a tax credit. Why not just lower the tax rate
by underseacables 5y ago
After years and years of pushing American manufacturing overseas, suddenly Congress wants to entice them back with a tax credit. Why not just lower the tax rate for corporations altogether, or better, close the loopholes that allow them to offshore their profits. Tax credits seem to be a a short term, ersatz panacea.
- dantheman 5y agoHow about not taxing offshore profits, and allow them to bring that cash back to the US and lower taxes overall.
- HWR_14 5y agoBecause then you end up in situations where all of your patents are held by a subsidiary in the Cayman Islands and 100% of their domestic sales happen to go to paying off the patent license fees.
- nickff 5y agoWe’re already in that situation, and the USA could use a re-capitalization.
- koheripbal 5y agoThen, frankly, we should just incorporate the Cayman Islands into the USA
- duped 5y agoTax the foreign company on their revenue within the United States then.
- dclowd9901 5y agoHow does that help the US, as a country, at all?
- 23B1 5y agoYou're not wrong, but I'm guessing there's some motivation right now to accelerate this given the amount of time it might take to stand up the manufacturing capability.
- XIVMagnus 5y agoI've noticed that the U.S. government usually only fixes issues in a short term mindset.. Same way they only gave stimulus checks and unemployment for a temporary time. I wish they would start working on long term solutions instead.
- frankbreetz 5y agoThey only gave temporary unemployment and stimulus because the pandemic was temporary
- cj 5y agoOne could argue that there could be a permanent structure (safety net) in place that sufficiently handles incidents, such as temporary mass unemployment, without the need to hastily scramble together and spin up stimulus programs like PPP and direct checks to everyone.
- Rapzid 5y agoSure but even then it was single checks to individuals when even Mnuchin was advocating for reoccurring payments.
- sdenton4 5y agoGood luck with that. The process at the national level is completely broken, so nothing substantial gets passed but budget reconciliations.
- datameta 5y agoPointing out a machine in disrepair to those who are looking at it does nothing to fix it.
- kwdc 5y agoGovernments and organizarions in general tend to also operate knee-jerk style as well. Its almost like there's a threshold that must be exceeded until a need for change appears necessary. That threshold could be lives lost, money lost, significant opportunities lost etc.
- syshum 5y agoRight now that would be politically untenable as majority in the House and Senate have the position that Corporations are evil and do not pay their fair share™, they are actively working on rolling back Corporate tax cuts from previous administration. Further there is a large amount of political power that is openly hostile to manufacturing believing the US should move beyond manufacturing as it is seen as "dirty" and not viable instead they put their stock in the "service" and "information" economies which have yet to prove their viability absent a strong mfg base. In the short term given all the news about chip shortages being a national security and economic security issue many politicians will look the other way for a small concession to a critical industry but still remain openly hostile to manufacturing in general
- voisin 5y agoOffshoring profits is not related to manufacturing offshore.
- ketzo 5y agoI mean, not currently, but you could make them related with legislation. Which is kind of the idea of this tax credit in the first place, I guess.
- gnarbarian 5y agoBecause Trump did that. And as we all know anything that Trump did has to be wrong.
- anonuser123456 5y agoWhy not just eliminate taxes on corporations all together? Corporations are _groups_ of people cooperating. If you want to make up revenue, tax individual capital gains / dividends as ordinary income. This removes the distortionary effects of taxation on corporations, but maintains tax revenues in a somewhat progressive structure.
- ineedasername 5y agoA zero corporate tax rate would highly disincentivise corporate reinvesting into things like capex for expansion or R&D. Right now if they don't plow money back into such things then they would have to book it as profit and pay taxes on it. Zero tax rates would remove that incentive. If there were no taxes on them at all then it would just sit there as people at the top find even more creative ways to give it to themselves while still avoiding a lot of personal taxes. There's also the fact that corporations are only made possible in the first places because of the infrastructure and services provided by the government, and those must be paid for. If we moved to a model where companies were responsible to building and maintaining the proportion. Of infrastructure resources they used then indirect funding of such things via taxes would be required as much.
- cj 5y ago> A zero corporate tax rate would highly disincentivise corporate reinvesting into things like capex for expansion or R&D. Valid point, but are there other ways to incentivize companies to reinvest profits without the incentive being tax avoidance? I would be a proponent of 0% tax on small-ish corporations, perhaps with profits under $1 million (or maybe $5-10 million), so that small businesses who can’t afford an army of accountants to hide profits are brought up to a slightly more level playing field with bigger corps.
- ineedasername 5y agoThe problem with taxing based on profits is they can be obfuscated in too many ways. I'm not opposed to what you're saying in theory, but I think there would need to be massive changes to the tax code to make that work.
- ineedasername 5y agoOffshore profits are why it's nearly useless to lower taxes and expect the wealthiest US companies with international holdings to pay more than they already do. Comparing nominal corporate tax rates between the US and other companies is nearly useless. As things stand now, for every dollar in corporate tax collected the US people pay about $18. Nominal corporate tax rates have pretty much zero to do with manufacturing moving overseas. That was always about lowering labor and other operating costs.
- nickff 5y agoTax rates have a lot to do with the location of manufacturing; highly automated manufacturing can really minimize the impact of labor rates, and operating costs are frequently lower in the USA. One of the best recent changes made to the tax code was to allow for 100% depreciation of some capital expenditures within one year; reducing corporate tax rates would have the impact of extending this effect.
- imglorp 5y agoA global would also reduce the incentive. If it's the same all over, might as well stay home. https://www.washingtonpost.com/us-policy/2021/06/05/g7-tax-us-yellen/ https://www.washingtonpost.com/us-policy/2021/06/05/g7-tax-u...
- deleted 5y ago[deleted]
- an_opabinia 5y agoA few products, like GPUs, already have a 25% tariff added to them. Consumers bore 100% of the costs. Nothing changed. They are still being made in China for the foreseeable future.
- ineedasername 5y agoAre costs like rent & utilities and construction of facilities really much more expensive elsewhere? I can't imagine that a lot of automobile manufacturing would move to Mexico if it cost more to operate. Unless you mean the labor savings more than offset other cost increases? I completely agree on capex, but changes there mean literally nothing for large multinationals that already pay close to zero taxes already. For me though, running a (very small) business on the side, I took advantage of that myself to make a few big ticket purchases (relative to the scale of the business)
- deleted 5y ago[deleted]
- fennecfoxen 5y ago> Why not just lower the tax rate for corporations altogether And use market pricing mechanisms? To what end? An efficient market? You madman! How will we be able to consolidate our power and command hefty campaign contributions if we cannot pick winners and losers, rewarding our supporters while meting out punishment to those who dare oppose us? If we go down this road, moreover, we might then have to admit that, besides taxes, our regulations and our multi-decade environmental reviews are there to cause problems, not just to solve them — that safety, pollution, justice, are all well and good themselves, but even more importantly, they are tools for us to express political favor and disfavor, to bend society to our will, and our advantage. No. We must feed the machine. Shakedowns today, shakedowns tomorrow; shakedowns forever.
- ajmadesc 5y agoYeah but how does a society deal with negative externalities like poisoning the water table, ecosystem destruction etc
- EarthLaunch 5y agoOne way is making the areas damaged into property. If you own land, you generally don’t want it polluted because it would lower the value. In those examples, make the water table and ecosystems into something people can own in portions. This is done with “views” that skyscrapers would otherwise block. Should be done with orbits to prevent space debris. The trouble is it seems impossible to turn certain externalities into property. It would require hard thinking and innovation. And just like regulations, it would lag behind industry and miss unknowns (lead, micro plastics).
- treeman79 5y agoOh my, next people will do basic research (https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465060730 https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465... ) and start making sane decisions.
- dv_dt 5y agoHaving a more even internal tax treatment with a minimum corporate tax baseline was discussed at the G7.
- duped 5y agoIt requires significantly less political capital to create a new tax cut or subsidy than to raise taxes or allocate new spending directly. Furthermore American tax policy w.r.t foreign profits is a rounding error when it comes to building up semiconductor manufacturing infrastructure. No American company is happy they have to go to China or Taiwan to tape out a new design. There simply isn't the infrastructure to do it affordably on this side of the Pacific, unless it has critical technologies that cannot be offshored for fear of industrial espionage.
- xwolfi 5y agoBut something nobody talks about are the sacrifices the population has to do to churn those things out of factories at the same scale as nations desperate to rebuild and feed their people. China succeeded because they went all in, their factory employees are still told today they have to sacrifice their youth to the nation. Will american factory workers work the same way ? Will you proudly join a factory and start building stuff, at the cost of your health? The solution, long term, can only come from China changing their mindset somehow, and then the next few places taking over the gap (I suppose Africa one day will wake up, India is starting a bit) Also, even if America start pulling out, this doesn't make their products automatically superior. Taiwan especially showed they can outpace in execution, maybe in design and even if the US stop buying there, now Taiwan itself can compete and lead where the US will follow: is it better to be independent on bad design or co dependent on good ones ?
- duped 5y agoSemiconductor fabrication is almost entirely automated and any new fabs in the US will be on the cutting edge of new automation technologies, so I don't think there will be quite so many workers involved. It's also rather specialized labor.
- whakim 5y ago> It requires significantly less political capital to create a new tax cut or subsidy than to raise taxes or allocate new spending directly. This is an incredibly important point, and one that I wish would come up more often. The reason that the US tax code is such a cluster@%&$ is because we insist (for reasons of politics) on conducting our fiscal policy almost entirely through the tax code, rather than just, you know, spending money directly on the stuff we want to invest in.
- 1e-9 5y agoBecause politicians have realized that semiconductor manufacturing capability is especially critical to our national security and prosperity. Having the bulk of it located overseas is risky during a time of war and potentially provides unacceptable economic leverage to others during a time of peace. It’s the same reason why we have massive farm subsidies. A lower tax rate for corporations altogether would also incentivize the relocation of noncrucial capability. Limiting the incentive to critical capability is less expensive.
- crazygringo 5y ago> After years and years of pushing American manufacturing overseas, suddenly Congress How has Congress pushed American manufacturing overseas...? Manufacturing has moved overseas simply because labor is cheaper abroad. Congress didn't have to push anything. It's just natural economics at work. At most you could say Congress has been part of reducing tarriffs and promoting free trade, which makes everybody involved wealthier. But that's no "push". It's just letting the free market do its job.
- HWR_14 5y agoManufacturing hasn't even moved overseas! It hasn't even really moved to Canada or Mexico either. The US manufacturing base has tripled since NAFTA.
- matwood 5y agoLabor is only one part. The externalities are cheaper to deal with/pawn off overseas.
- lumost 5y agoArguably, Congress made/authorized the trade deals which were designed to move manufacturing over seas. There was a theory that US firms would sell higher end goods and services to developing nations who did the manufacturing. Treaties were made with countries that occasionally had asymmetric tariffs in favor of the developing nations (Columbia had such a deal) based on this theory. While debatable, the belief now is that the majority of those service jobs were actually worse than the old manufacturing jobs which provided stable 9-5 employment, benefits, and a career path. There is further concern that trading partners who took up the manufacturing side of things are now developing and exporting the supposedly advanced services and technology companies the "knowledge economy" was meant to provide (e.g. TikTok). In the case of some industries like semiconductor manufacturing it's also posing existential national security questions.
- crazygringo 5y agoI haven't heard of this so I'd like to learn more. Do you have some sources you can point me to? I've studied economics and history quite a lot and have never heard of the idea that Congress intended to migrate manufacturing jobs to service jobs, or that the US would intentionally give another country an advantage in order to achieve this. What is the name of the Columbia deal you're referring to? And is there any specific time period or administration you're describing? Or economists whose views provided the theoretical underpinning of why shifting from manufacturing to services would be desirable national policy?
- darth_avocado 5y agoSimple, lower tax rate doesn't Guarantee industrial investment. It can lead to bunch of things like share buybacks, higher CEO pays etc. However, targeted tax breaks can help guarantee industrial investments.
- crispyambulance 5y ago> After years and years of pushing American manufacturing overseas, suddenly Congress wants to entice them back with a tax credit. It wasn't "Congress" behind the push to outsource everything to the point where many once mighty American corporations have become little more than a veneer of supply-chain specialists, the C-level suite and their finance finaglers. This was done deliberately and systematically by corporate leadership and driven by greed. I suppose some might attribute the root-cause to the rise of neoliberalism and the globalization of the economy. Whatever it was, it took decades to unfold and it will take decades to reverse (if that's even possible). Congress won't be able to fix this mess by giving away a few freebies to rich, powerful, and profoundly self-interested corporations. They'll take the money, of course, in whatever form it's given. What they do with that money is literally "their business" and it's not going to serve anyone's interest other than the shareholders.
- alexashka 5y agoBecause this is the easiest way. It's like adding extra code as opposed to changing code within a spaghetti codebase. Make no mistake, politics is a giant spaghetti codebase no politician really understands.
- wolverine876 5y ago> Why not just lower the tax rate for corporations altogether You're assuming it's true that manufacturing has moved overseas because of tax rates. Remember that it used to be blamed on labor costs. All those arguments suit the arguers, who don't want to pay taxes or wages. There are many reasons, including that Americans can have better paying jobs than what they did 50 years ago. Another issue is that Americans have to pay for things, and if the corporate tax rates are lowered (they are already pretty low), then other people have to pay a greater share. Who?
- legulere 5y agoGermany has more manufacturing and high taxes. It‘s not just about taxes.