Green told The Epoch Times that his forthcoming bill would allow firms to deduct the entire cost of capital spending associated with relocating from China—known as “immediate expensing”—to lure companies to move to the United States. The bill would pay for this with money collected from U.S. tariffs on Chinese imports, he proposed.
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The idea of covering 100 percent of moving costs was also recently endorsed by White House economic adviser
Larry Kudlow, who said it would be “a very good thing for American companies.”
Rep. Mark Green (R-Tenn.) is set to introduce a bill to help companies move their manufacturing from China to the United States as momentum builds for the country to “decouple” from the Chinese regime as a result of the pandemic. Green told The Epoch Times that his forthcoming bill would allow...
www.ntd.com
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BS, who do you think pays the Chinese tariffs, we do. And we do not need to pay to move them back.
I want to start off by saying that I actually on a general level, agree with you. I don't think we should be giving tax breaks for companies moving around.
However, there are couple of claims being made in response to your post, that I disagree with.
First, the claim that companies shouldn't pay anything for moving. Basically that this tax cut will pay for their entire moving expenses.
Wrong. This is a tax deduction. It does not "cover" the cost of moving.
Say the cost to move operations out of China, is roughly $1 Million dollars. That means you can deduct $1 Million dollars from your taxable profits. The current corporate tax rate is 21%.
That means a company spent $1 Million dollars, and saved $210,000 in taxes.
How does $210K in taxes saved.... cover a $1,000K cost of moving expenses? Well it doesn't. There are no taxes, or tax deductions, or tax abatement anywhere, that end up with the company coming out ahead.
The idea is unsupported by the evidence.
Second, the tax is unlikely to even be as effective as I outlined above. Remember, companies only pay tax on their profits. So in order to even save that $210,000 dollars in taxes I mentioned above, you have to actually owe that much in taxes to begin with, which means posting profits.
The problem we have right now, is companies are not posting much in profits. Because everything is shut down, there is low, to no profits to be had. Well if you owe zero taxes, because you have no profit, how much good does a tax deduction do you? None.
Additionally, the fundamentals of where to move a factory, are as always, based on how profitable the action will be.
Meaning that, say you have 3 options on where to move a factory. Canada, US, Mexico. You can move the factory to any of those 3 places. You do the calculations, and find you'll make a profit of:
Canada: $1 Million per year.
Mexico: $10 Million per year.
US Barely break even per year.
Where are you going to build the factory? Mexico.
One short-term tax deduction of $210,000, is never going to get you to move the factory to the US, is you can't make huge profits in the US.
This is why Mexico doesn't need to even after a tax deduction. If you have the best location to make profits, you don't need to give a deduction to get people to move there.
We need to stop with these stupid short term, lame excuses for incentives, and focus on making the economy as a whole more attractive to make a profit in. De-regulate stuff. Reduce expensive requirements. Get the EPA to stop making it so difficult on companies to open new factories. Reduce the red-tape.
You make the US economy the most profitable economy in the world to produce and manufacture things, and we won't need a tax break to get people to build and invest here. They'll be stampeding to be in this market, without any incentives.
