Paul Ericksen, IndustryWeek’s supply chain advisor, shares his insights on recent news.
This week, we saw three news items that supported the idea of government involvement in industry.
Don’t Mess with the Tax Write-Off for New Equipment argues that job creation during non-recessionary periods is a function of two factors: changes in the labor force and Federal Reserve policy. Wages largely are not set on the basis of an individual firm’s or even industry’s productivity (translate—increase in profitability (P.D.E.), and just because one firm raises productivity does not mean that they can or should raise wages.
The article posits that the governmental program accelerating depreciation on new equipment is a good thing—but that people should not anticipate increased jobs or wage growth as a result of the program. The article also points out that company profitability has increased as a result of the program.
Hmmm. All taxpayers, not just business owners and stockholders, should end up benefiting from tax reduction programs, since to support them the taxes of all are increased. This particularly should be the case when those programs lead to increased company profitability.
If a program doesn’t deliver on the premises that it was based on—and if you recall, accelerated tax write-offs on new equipment were justified based on job creation and increased wages—it needs to be tweaked so that it does.
Companies Get Leniency in Made-in-America Export Tax Break reports that new IRS regulations make it easier for companies to claim a tax break for exporting their Made-in-America goods and services. The release of the regulations gives corporations a first look at what they need to do to claim a new deduction in the 2017 tax overhaul, which could lower their export income tax to about 13% from 21%.
The article points out that the 2017 tax overhaul has yet to spark the development of new factories or the creation of new jobs in the U.S. Increasing exports is a good thing in itself, since it helps our country’s balance of trade, thus reducing inflationary pressures. On the other hand, if it doesn’t end up increasing jobs and wages the tax break will be seen a not fulfilling the premises under which the tax breaks were justified.
Finally, Made-In-American Tax Break Is Not Enough To Spur Resourcing, Experts Say quotes tax advisors saying that President Donald Trump’s reductions on foreign-derived intangible income for U.S.-based companies “have not been enough to lure companies back to America,” and that they may face a legal challenge from the World Trade Organization.
Paul Ericksen, IndustryWeek’s supply management advisor, will be a featured speaker at the Manufacturing Technology Conference in Pittsburgh. On April 2, he will lead a session in the Supply Chain track called “It Takes Two to Tango: How to Keep Both Suppliers and Customers Satisfied.” On April 3, Ericksen will conduct the workshop “Build-to-Demand: The Lean End Game.”