“As Factory Jobs Disappear, Ohio Town Has Few Options.”
That headline from the New York Times has become an all-too-familiar staple of American journalism, a bitter reminder of how globalization has decimated the manufacturing sector in America’s heartland.
Ohio alone lost 160,000 manufacturing jobs over a three-year period, thanks largely to low-cost imports. The Times story describes the heartache this economic upheaval sent through the city of Canton, shuttering factories, spurring hundreds of layoffs and forcing local businesses to declare bankruptcy. One 54-year-old woman who lost her job at a local steel mill told the Times, “We don’t have too much light at the end of the tunnel.”
The story ran in 2003.
The U.S. has seriously been grappling with the repercussions of low-priced imports for the last decade-and-a-half. The decline accelerated in 2000, right around the time China joined the World Trade Organization and started flooding the American market with cheaper goods. The problem is only getting worse for those American workers and businesses competing with foreign competition. And the existing tax code is fueling this imbalance.
Under the current tax code, American businesses that sell their goods and services in other countries pay a 35% rate on whatever profits they return to the U.S. But the code rewards those American businesses that import foreign-made products by allowing companies to deduct those expenses from their tax bill. In other words, the U.S. tax code rewards foreign imports while penalizing American companies that export goods and services to other countries.
There is a finally the prospect of a light at the end of the tunnel for that laid-off steelworker, and millions of others. For the first time in decades, Washington is taking real steps to fundamentally revamp the tax code. And the good news for American workers is that President Donald Trump and congressional leaders seem committed to an overhaul that will end the tax preference for foreign-made products, a reform that could help keep jobs in the U.S. and make American businesses more competitive at home.
The debate, at this point, centers around a wonky phrase that few actually grasp – “border adjustability.” What this really means is that congressional leaders want to lower the overall corporate rate from 35% to 20% and apply it equally to imports and things made here. This would level the playing field for American manufacturers, allowing businesses in our own backyard to compete with foreign companies that currently benefit from lower costs and a favorable U.S. tax code.
Right now, companies are taxed at exactly the same rate regardless of whether they sell their products in the United States or overseas. In other words, American producers are hit twice. They’re forced to compete with cheaper imports sold in our country. At the same time, American companies face higher costs for products sold abroad, making them less competitive in those markets as well. Whether we know it or not, our tax code levies a “Made In America” tax on every domestic producer and manufacturer, making it harder and harder for these companies to keep their doors open and keep American workers employed.
The plan advanced by Republicans in the House would get rid of this “Made in America” tax by removing the existing barrier that makes it more expensive for American companies to return money they make in foreign markets back to the U.S. That, coupled with immediate deductions for capital investments, would encourage companies to expand existing operations and even build new ones here inside our borders.
The end result: Our manufacturers have a much greater incentive to produce American goods for sale abroad. The plan also removes the existing incentive for American companies to park their overseas profits in other countries or allow themselves to be gobbled up by foreign rivals in order to enjoy favorable tax rates.
Most importantly, the House Republican plan would eliminate one major incentive for companies to outsource American jobs. And that could help reverse the tide of heartache and job losses that have made communities, like Canton, shells of what they once were, with shrinking populations and fewer opportunities for those who remain.
America has been left behind as the countries we compete with lower their tax rates and reduce the cost of doing business. Many of these same countries we compete with have already modernized their tax code to deal with the realities of the global economy by promoting exports and subjecting imports to the same tax treatment as domestic companies.
We need tax reform to make it easier to invest in American businesses, American products and American workers. It’s time for Congress to usher in a new era of American prosperity.
After a decade-and-a-half of manufacturing decline, it’s time to start telling the American comeback story.
Megan Barth is the founder and proprietor of ReaganBaby.com, a nationally recognized political commentator and woman’s advocate. She has appeared on NewsMax TV, One America News Network, America Trends with Dr. Gina, The Blaze Radio, and has regular weekly appearances on a variety of nationally syndicated radio shows.
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