Joe Biden accused Donald Trump on Wednesday of breaking his promise to bring jobs back to the U.S. as the Democratic presidential nominee laid out his plan to improve U.S. manufacturing with new taxes on companies that move operations offshore.
“He’s hoping we just have poor memories,” Biden said outside a United Auto Workers union hall in Warren, Michigan. “He doesn’t give us much credit but the American people are smart, decent and they’re hard-working.”
Biden launched a renewed focus on economic issues this week, beginning with a push to boost American manufacturing and operations. He called for a 10% tax penalty on U.S. companies that move operations overseas and a 10% tax credit for companies that create jobs in the U.S.
“Under Donald Trump, Michigan lost auto jobs even before Covid hit,” he said of the recession that began shortly after the coronavirus shut down much of the country. “And what about offshoring? Has Trump delivered on stopping companies from shipping American jobs overseas? You already know the answer to that. Of course not.”
Biden also promised to reverse Trump administration policies that allow offshoring to take place and to take executive action during his first week in office to direct the federal government to buy American goods and support American supply chains in their procurement processes.
Biden’s proposals echo Trump’s 2016 campaign push to focus on reviving manufacturing in the U.S. and creating more U.S. jobs, largely through his signature legislative achievement, his 2017 tax law. But the economic strength he planned to run on for re-election collapsed as the virus swept the U.S.
The policies are part of a broader economic push from Biden in a crucial battleground state as polls show voters about evenly split on which candidate they trust more to manage the economy.
Biden’s proposal to target offshore profits adds to a previously announced plan to require corporations to pay a minimum 15% tax on their domestic profits. The combination would greatly inhibit companies’ ability to shift income and tax breaks between countries to avoid paying levies in the U.S. and abroad.
Biden proposed a 28% corporate tax rate plus a 10% penalty surtax on the profits from any production by a U.S. company overseas for sale on American soil, making the overall tax rate on those profits 30.8%. The penalty will also apply to call centers and services that a U.S. company locates overseas but that serve the U.S.
The surcharge is an attempt to “prevent firms from tax-rate shopping,” said Carl Tannenbaum, chief economist atNorthern Trust and a former official at the Chicago Federal Reserve. “He’s trying to close the doors to multinationals that are flexible enough to move operations to other jurisdictions.”
Tannenbaum points out that these changes would require congressional action and success would depend on Democrats winning a filibuster-proof majority in the Senate in November.
Biden is also proposing a 10% “Made in America” tax credit for companies that create jobs for American workers and accelerate the U.S. economic recovery. It will be available for revitalizing closed or nearly closed facilities, retooling or expanding facilities, and bringing production or service jobs back to the U.S. and creating U.S. jobs. It will also apply when a company is increasing manufacturing wages above the pre-Covid baseline for jobs paying up to $100,000.
The Trump campaign has also proposed a “Made in America” tax credit in addition to tax credits for companies that bring back jobs from China, but he has provided no details on how that would work.
Biden’s plan would also end what his campaign describes as three “Trump offshoring loopholes” that were part of the 2017 tax law: allowing U.S. companies that locate production or call centers overseas to pay no taxes on the first 10% of profit, permitting companies to combine strategies to move profits overseas and park profits in tax havens to avoid paying all U.S. taxes, and applying taxes at just half the rate a U.S. company would pay for activities in the U.S.
Biden would double the Trump tax rate to a minimum tax of 21% on all foreign earnings of U.S. companies overseas. He would also end the use of tax-haven strategies by applying the minimum tax to each foreign country separately.
Biden’s executive actions would use The Defense Production Act and the Federal Property and Administrative Services Act of 1949 to enforce Buy American rules. Among other measures, he would also crack down on companies that label products as Made in America if they’re coming from China or elsewhere and create a Made in America office within the White House Office of Management and Budget to ensure that the government complies with Buy American rules.
Michigan’s unemployment rate was 8.7% in July, down more than 6 percentage points from the previous month, as the state’s economy begins to reopen after strict virus lockdowns.
— With assistance by Laura Davison, and Christopher Condon
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