Clinton to unveil new manufacturing jobs tax incentive

Chad Livengood
Detroit News Lansing Bureau

Democratic presidential frontrunner Hillary Clinton will unveil a tax incentive plan Tuesday to spur manufacturing jobs in U.S. and Michigan cities hardest hit by plant closings and mass layoffs, The Detroit News has learned.

On the campaign trail in New Hampshire, the former U.S. secretary of state and will roll out a plan giving manufacturers a 39 percent tax credit on equity investments in towns that experience major job losses, according to the Clinton campaign.

Clinton’s campaign cited Ford Motor Co.’s indefinite layoff of 700 workers in April at its Michigan Assembly plant in Wayne as an example of the kind of job losses that could qualify a city to offer federal tax credits targeting new manufacturing investments. Ford plans to build a new product at the factory in 2018, which The News reported in August would be a resurrection of its once-popular Ranger truck.

The Clinton credit could be claimed over seven years under the existing New Markets Tax Credit the federal government uses to entice commercial development in urban areas, according to the Clinton campaign.

“By strengthening our manufacturing sector for the future, we can help create the next generation of good-paying jobs and put more people back to work in Michigan and across the country,” Clinton said in a statement sent to The News.

Clinton’s manufacturing plan relies on some parts of economic development strategies devised during her husband Bill Clinton’s presidency from 1993 to 2000.

The New Markets Tax Credit was created at the end of the Clinton administration, but not fully implemented until after Republican President George W. Bush took office in 2001, said Brett Theodos, senior research associate at the Urban Institute in Washington, D.C.

“I understand why they would want to use that as the platform — New Markets has been able to attract some bipartisan support in an area where any investment in low-income communities is difficult to find,” said Theodos, who was part of a 2013 study of the effectiveness of the tax credit in luring urban investment.

But a Michigan State University economist has doubts about whether a new tax credit for manufacturers is really going to stem the tide of manufacturing production moving overseas given the rising value of the U.S. dollar. A stronger dollar makes U.S. exports to other countries more expensive and imports to America cheaper.

“It’s nibbling around the edges of the deeper issues, I think,” said Mark Skidmore, a MSU economics professor. “A tax credit might create a few jobs in these struggling places, but it’s not the solution at all. There’s these really deep problems in our financial system, and the dollar’s relative strength is making it more difficult to produce things here in the U.S.”

“I don’t think a tax credit is necessarily going to do the job,” he said.

Communities would be eligible for Clinton’s proposed Manufacturing Renaissance Tax Credit if they experienced a permanent plant layoff or reduction in employees at a manufacturing facility.

Clinton’s manufacturing tax breaks plan would let eligible cities choose an alternative zero percent capital gains tax option for companies that invest in manufacturing over a five-year period.

The Clinton campaign also pointed to generic drug maker Caraco Pharmaceutical Laboratories’ closure of its Detroit factory in mid-2014 and layoff of 178 workers as another example of the kind of job losses that would trigger eligibility for the tax credits.

In the Republican presidential nomination contest, Kentucky U.S. Sen. Rand Paul has offered a similar proposal to eliminating all capital gains taxes in urban areas with high unemployment — specifically Detroit — by creating “economic freedom zones.”

Clinton’s introduction of a manufacturing tax incentive proposal nine weeks before the Feb. 9 New Hampshire primary may be part of a year-long debate she hopes to ignite on the campaign trail over economic policy. The Democrats have won industrial powerhouse Michigan’s electoral votes in every presidential election since Bill Clinton’s victory here in 1992.

“You have to do things to keep the base happy,” said Larry Sabato, director of the University of Virginia’s Center for Politics. “That’s something not just for Michigan, but probably aimed at Ohio, Wisconsin and all of the Rust Belt states.”

U.S. Sen. Debbie Stabenow, D-Lansing, issued a statement that touched on the kind of economic debate Clinton may be hoping to engage with the eventual Republican nominee should she win the Democratic nomination over Vermont Sen. Bernie Sanders and former Maryland Gov. Martin O’Malley.

“The Clinton plan would stop tax incentives that reward companies that ship jobs overseas and would instead help bring jobs home,” Stabenow said in a statement.

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