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OPINION

Tax Reform - More Than Manufacturing

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.
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Both President Trump and Speaker of the House Ryan want to increase U.S. jobs by increasing the number of Americans in the manufacturing work force and both believe that changes to corporate taxes are part of the formula to accomplish that goal. Both are correct, but their goals should also include returning middle class computer processing jobs and call centers that have also moved offshore. Outsourcing does not begin and end with manufacturing.

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The accounting department of a major U.S. corporation should not be outsourced to another country. Engineering, medical reviews, accounting, legal research and millions of other jobs should not be exported to other countries. The same with call centers. We should be using the Internal Revenue Code to help U.S. companies operate within the United States.

President Trump appears to want to accomplish bringing jobs back to the U.S. by jaw-boning manufacturers that sell in the United States to build their products in the United States, lowering tax rates and imposing tariffs where manufacturing is done offshore. Congressman Ryan appears to want to accomplish the same results by essentially building tariffs into the Internal Revenue Code and indirectly achieving what appears to be a tax on all imports.

Yes, we need to do more to attract manufacturing jobs back into the United States. We also need to attract the non-manufacturing jobs that have been outsourced during the past two decades. Cheap communications have led to the export of millions of both high paying and moderately paying non-manufacturing jobs. Tax reform needs to address both manufacturing and non-manufacturing jobs. The Internal Revenue Code should promote moving manufacturing jobs and processing jobs back to the United States and away from India, Vietnam and the Philippines.

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The axiom in war strategy is to be certain that one is preparing to fight the next war rather than preparing to fight the last war. While the goals of President Trump and Congressman Ryan are laudable, precise and immediately necessary, one could hope that they think bigger and longer term. There is an easy fix to the current issue of manufacturing by making an easily drafted couple of changes to the existing Internal Revenue Code. These changes should also include incentives for U.S. companies to move processing jobs back to the United States. There are as many computer related functional jobs that have moved offshore as there are manufacturing jobs. Let us protect as many American workers as possible.

Section 199 of the Internal Revenue Code today reduces the top U.S. corporate tax rate from 35% to a touch less than 32%. Section 199 was passed in 2004 with more than forty Democratic Congressmen and women people voting in favor and passed by voice vote in the U.S. Senate. It should be no different in 2017. To move manufacturing jobs back into the United States, all Congress needs to do is significantly increase the percentage reduction in the tax rate.  To move processing jobs back to the United States, all Congress has to do is offer a similar reduction in tax rates for non-manufacturing jobs. This is an easy fix and it should be one hundred percent non-partisan. It is America first without throwing a hatchet at other nations.

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I concur with President Trump that the Ryan tax plan is too complicated. I would argue that a tax plan that so dramatically and visibly changes our approach to tariffs as the Ryan plan is one that would need intellectual and practical discussions in several Senate committees including Foreign Relations, Commerce and Agriculture as such changes would be wildly unacceptable to ally and foe alike. I bid for any Trump proposed tariffs. Nothing happens in a vacuum.

Increasing the rate reductions in Section 199 of the existing Internal Revenue Code and expanding the language to cover non-manufacturing jobs that are being performed overseas would be a great way to approach the issue. Everyone should be happy.



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