A new study released by the National Association of Manufacturers (NAM) makes clear the devastating effects of allowing tax reform measures from the 2017 Tax Cuts and Jobs Act to expire.
The study predicts that if Congress does not renew these measures, then nearly six million jobs will be put at risk, approximately $540 billion in employee wages will be lost, and that U.S. GDP will decrease by $1.1 trillion.
“The 2017 tax bill was like rocket fuel for American manufacturers,” Arizona Manufacturers Council Executive Director Grace Appelbe said. “Letting any of the bill’s pro-growth reforms expire risks real harm to the sector that is driving job growth for the U.S. economy.”
Manufacturers under threat
The manufacturing industry is expected to face the greatest economic impact if Congress fails to act, according to the study. More than one million manufacturing jobs and $126 billion in wages for manufacturing workers are at risk if Congress fails to maintain key pro-manufacturing policies from the 2017 law, and the effects on the manufacturing industry will also likely create a GDP loss of 284 billion.
“The time to act is now. Millions of American workers are depending on the manufacturing sector to continue driving America forward,” NAM President and CEO Jay Timmons said. “Pro-growth tax policies from President Trump’s 2017 tax reforms were rocket fuel for manufacturers and made the U.S. economy more competitive on a global scale. Manufacturers kept our promises to create jobs, raise wages and benefits and invest in our community. By acting now, policymakers can choose economic growth over economic disaster and protect American livelihoods.
Provisions set for expiration
The reforms that are set to expire are the specific individual income tax rates and brackets, the estate tax exemption, and the pass-through deduction for smaller businesses whose revenues are reflected on the owner’s individual tax return rather than larger corporations that pay taxes under the corporate tax code.
“Small manufacturers are disproportionately impacted by tax increases,” said Courtney Silver, the outgoing chair of the NAM’s Small and Medium Manufacturers Group and the president and owner of Ketchie, a North Carolina-based machining firm. “We’re already struggling thanks to the expiration of immediate R&D expensing, full expensing for capital equipment purchases and interest deductibility for job-creating projects. Congress should reverse these expirations and prevent even more devastating changes to the pass-through deduction, the estate tax and more from taking effect next year.”
The TCJA’s expensing reforms spurred large capital investments by allowing businesses to expense the costs of machinery and equipment immediately rather than over several years.
The National Association of Manufacturers is the largest manufacturing association in the United States, representing manufacturers of all sizes across every industrial sector and all 50 states.
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