Biden touts corporate tax plan but experts question impact
Detroit — Against the backdrop of American-made vehicles while surrounded by union workers, Joe Biden on Wednesday promised he would take on companies that send manufacturing overseas.
The Democratic presidential nominee's plan calls for a 28% corporate tax rate, an increase from the current 21% rate. It would establish a 10% "offshoring penalty surtax" on those taxes for profits U.S. companies make on goods made overseas and sold in the U.S., which would result in a 30.8% tax rate.
"If your big corporate strategy is to boost your shareholders' profits, your CEO's bonuses, by moving jobs out, well we are going to make sure you not only pay full U.S. taxes on those profits, but we are going to guarantee we're going to add a 10% offshoring surtax to your bill," Biden said during his campaign rally Wednesday in Warren.
While the end goal is to keep manufacturing in the U.S., experts say the plan could do the opposite, pushing companies to instead have foreign companies supply product and stop shipping in their own and make America less of place companies will want to invest in.
"If you want to provide good jobs for Americans and you want an attractive place to do business, you need to make it competitive with the rest of the world and increasing the rate from 21% to 28% does not make you more competitive with the rest of the world, that's putting it mildly," said James R. Hines Jr., research director at the University of Michigan’s Office of Tax Policy Research and economics professor.
What can be done to keep manufacturing in the U.S. is help companies be more competitive, which is what another aspect of Biden's plan does with a 10% tax credit for certain investments that spur more domestic manufacturing jobs.
"If you made it less expensive to invest in the United States, more people would invest in the United States," said Patrick Anderson, principal and CEO of Lansing-based Anderson Economic Group.
Anderson sees the offshoring tax as "completely unworkable sentiment-based tax policy that even a Democratically controlled Congress would be unlikely to adopt because it would have the effect of reducing the number of jobs in America."
The Biden plan, Hines says, doesn't push foreign companies that sell in the U.S. to have production in the U.S.
"All that's going to do is if there is some product where the most efficient way to manufacture it is to make it in Canada and sell it in America, there will only be Canadian companies that do it ... and American companies won't," Hines said. "But have you really achieved anything if you've stopped American companies from doing it, but you're not stopping Canadian companies?"
But labor unions on Wednesday supported Biden's plan.
United Auto Workers President Rory Gamble, who could not attend the Biden campaign event after being exposed to COVID-19, sent a statement out calling the proposals "strong."
"For far too long it's been a fight to maintain the jobs we have while new automotive products and assembly are sent to Mexico, China and abroad," Gamble said in a statement. "Trade enforcement will help."
The United Steel Workers also backed the plan. United Steelworkers International President Tom Conway said the plan "offers common-sense solutions and a clear path to success. The Biden-Harris plan shows that they will prioritize domestic manufacturing and more importantly that they intend to put American workers first.”