The United States can keep and increase private sector employment only if tax reforms are done. Corporate tax rates must be lower. The US has one of the steepest corporate tax rates among developed countries. It is no wonder that many American companies opt to manufacture in foreign countries. They not only enjoy lower tax and lower labor expenses, but also invests the saved money and consequent profits into those countries. It makes sense as any money repatriated into the US will be subjected to sky high tax rates on repatriated money.
Taxes and bringing back money
Companies analyze overall expenses when they take a decision to manufacture goods at a particular location. Lower taxes could induce them to keep operations inside the United States. It is not to say that everything is hunky-dory abroad. American companies come against issues related to quality control and the transport expenses. The latter could add up to a considerable sum. A blend of eliminating transport costs and lower taxes could encourage manufacturing in existing American facilities. The lower taxes will also bring back the money earned from the foreign operations of companies back to US shores. These monies can be invested in American facilities. The benefits will percolate down to an increase in US jobs.
As the Trump administration and Congress move towards a consensus on issues related to tax reform, a key piece would be making the investment expenses totally tax deductible. As per the conservative agenda, two primary aims exist. The first goal is to lower corporate tax as much as possible, and if feasible, eliminate it. The second goal is to permit businesses to deduct all their investment expenses from the taxable income.
Both aims would reduce capital cost, resulting in investment increases, wages and jobs. Since established businesses prefer a rates dip as these benefit the existing company operations. However, workers and the economy benefit from expensing.
Expensing provides much better values than lower corporate rates. If expensing is done, it will raise salaries. Employment will also increase with a greater number of jobs being produced than the rate of job elimination. Since expensing will be applied solely to the new investments, it will only benefit those companies which invest and create jobs. Any company which ceases to invest at present will not enjoy many benefits. It also helps that expensing slashes compliance cost of corporate tax. Tax paying will also be simplified.