Joe Biden’s ‘Made in America’ plan may not bring back as many jobs as the campaign expects because of corporate tax increases in other parts of his agenda.
By imposing a minimum tax on corporations with certain earnings and increasing the corporate income tax, Biden’s plan to incentivize companies to invest and bring jobs back to the United States could be erased in part or completely, right-leaning economic analysts say.
“If a company has to pay the minimum tax, that could disincentivize them from utilizing his Made in America tax credit,” said Garrett Watson, an economist at the Tax Foundation, a center-right think tank.
“It’s basically a tax floor, so if you’re beneath that floor, his plan doesn’t help you much. It’s focused more on sticks rather than carrots,” said Watson.
As part of a broader initiative to take on President Trump on economic issues, particularly Trump’s protectionist policies, Biden in September proposed changes to the corporate tax code to incentivize investments in American manufacturing and punish U.S. companies that offshore jobs.
The former vice president has proposed a 10% tax penalty on companies that move their operations overseas and a 10% tax credit for companies that create manufacturing jobs in the U.S.
Biden’s plan would also close several tax “loopholes” in Trump’s 2017 tax law that the campaign claims allow American companies to shield their profits made abroad from full taxation.
At the same time, Biden, as part of his broader tax agenda, would increase the corporate income tax rate to 28% from 21%, create a minimum tax on corporations with book profits of $100 million or higher, and double the tax rate on Global Intangible Low Tax Income earned by foreign subsidiaries of U.S. firms to 21% from 10.5%.
Overall, Biden’s tax agenda would increase the tax burden on most U.S. companies with foreign operations, and so the benefits of his ‘Made in America’ plan would thereby be significantly diminished, some economists said.
“Biden’s proposals would overall discourage investment in the U.S. rather than the other way around,” said Kyle Pomerleau, an economist at the American Enterprise Institute, a right-of-center think tank.
Pomerleau said he disagreed with the fundamental premise of Biden’s ‘Made in America’ plan, which is that Trump’s 2017 tax cut encouraged companies to go offshore and invest overseas rather than in the U.S. Biden has said he wants to reverse Trump’s tax cut, including in his ‘Made in America’ plan.
“I think Trump’s tax cut encouraged domestic investment and did not encourage production overseas even if there is debate about how much overall investment there has been compared to before,” said Pomerleau.
Trump, in his second term agenda, announced in August that he would create his own ‘Made in America’ tax credits but did not give any further details on how they would be structured or when they would be put in place. Economists on both sides of the aisle who spoke with the Washington Examiner criticized Trump for not putting out a detailed list of policy goals to evaluate for his reelection, including his ‘Made in America’ idea.
Nevertheless, if Trump wins and his tax credit idea is put in place, it will likely be “much broader and larger” than Biden’s, said Pomerleau. This is likely to be the case, Pomerleau argued, because Trump’s actions in the past four years have shown that he is serious about attempting to bring back manufacturing jobs from other countries and has imposed heavy tariffs on multiple nations.
However, liberal economists say that Biden’s plan would bring jobs and investment back to the U.S. by forcing corporations to pay higher taxes abroad rather than lower taxes in the U.S.
“His plan will make sure companies don’t pay next to nothing abroad, but also, his tax credits will [be] rewarding new investment while taxing old investment, which is a healthy trade-off,” said Seth Hanlon, an economist with Center for American Progress, a liberal think tank.
Biden’s minimum tax on corporations with profits of $100 million or higher could scale back the benefit of the 10% tax credit of his ‘Made in America’ plan, said Hanlon, but it would vary from company to company and change over time.
Furthermore, Biden’s plan will raise revenue for the federal government and create even more jobs in the country through Biden’s ambitious public investment programs, Hanlon said.
Biden plans to spend almost $7 trillion over the next decade on areas such as climate change, infrastructure, healthcare, and higher education.
