Weekly Column: Supporting Idaho Manufacturing Through A Competitive Federal Tax Code
Guest column submitted by U.S. Senator Mike Crapo
A vibrant manufacturing sector is a cornerstone of strong economic activity and jobs here in Idaho and across America. Manufacturing accounts for more than 106,000 jobs in Idaho and 9.97 percent of Idaho’s workforce with an output valued at $10.4 billion, according to 2018 and 2019 data compiled by the Idaho Department of Commerce. Nationwide, the manufacturing sector accounted for 15.7 percent of our country’s gross domestic product (GDP) in 2019 and 14.6 percent of Idaho’s GDP. To help makers of American products grow deep roots in the U.S., increase production, innovate and add jobs, federal policies must incentivize, not discourage, domestic production. This includes maintaining a competitive corporate tax rate that encourages more growth, research and development here in the U.S.
Prior to the Tax Cuts and Jobs Act (TCJA) of 2017, the United States had one of the highest corporate income tax rates among developed countries. The U.S. also confronted pressures for domestic firms to invert or be acquired by foreign companies leading to U.S. headquarters and jobs going abroad.
Today, as a result of the TCJA, the United States has a flat 21 percent corporate income tax rate. The Business Roundtable reports, “The broad-base, lower-rate corporate tax enacted in 2017 has achieved its objectives of making the U.S. a more attractive location for jobs and investment. Prior to the pandemic, the 3.5% unemployment rate was the lowest in 50 years, wages and investment were growing, and GDP was expanding much faster than forecast.”
Another key aspect of our competitiveness is capital investment. The Internal Revenue Code has a number of tax incentives for capital investment, which, when paired with a competitive corporate tax rate, are essential to promote domestic manufacturing. Incentivizing capital investment in a critical Idaho industry—semiconductors—has rightly garnered bipartisan interest. In a recent executive order, President Biden noted a growing concern about the supply of semiconductors. Micron, Intel and other American semiconductor manufacturers are operating in an increasingly competitive and sometimes unscrupulous market. Only a few years ago, Chinese state-owned companies stole trade secrets from Micron in an effort to gain an advantage against leading producers of a sought after technology. Helping U.S. companies strengthen their supply chains to protect these critical technologies is vital to safeguarding national security and the health of our economy.
The semiconductor industry supports more than 8,200 high-paying jobs in Idaho, with an output valued at $2.3 billion and 2.84 percent of Idaho’s GDP, according to the Idaho Department of Commerce. Further, the U.S. Census Bureau reports semiconductor devices are Idaho’s leading export, valued at $265 million in 2020. Ensuring federal policy best supports innovation and development of new technologies will keep Idaho on the world stage for research and development.
I serve as Ranking Member of the U.S. Senate Finance Committee that recently held a hearing to discuss the effects of the U.S. tax code on domestic manufacturing. The hearing witnesses represented a comprehensive range of perspectives from the business community, academia as well as labor. There was significant discussion about tax incentives for more research and development here in the U.S., and witnesses stressed the importance of keeping the corporate tax rate low. I will continue to work with my Senate colleagues and others as we consider tax proposals that can help address the global semiconductor shortage, supply chain issues and encourage domestic manufacturing. Despite the decreased corporate tax rate from the TCJA, the U.S. still holds the 11th highest corporate tax rate among developed countries. We cannot afford to reverse the growth fueled by the TCJA. We must build on its progress.
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