In yet another round of proposed government giveaways, Democratic presidential front-runner Hillary Clinton unveiled a tax incentive plan Tuesday aimed at reinvigorating employment growth in cities such as Detroit that have lost manufacturing and production jobs or are on the brink of plant closings or major layoffs.
Her proposal gives a 39 percent tax credit on equity investments made by manufacturers in towns that have experienced economic downturns. The tax credit could be claimed over seven years as a part of the existing New Markets Tax Credit, a program the federal government uses to spur commercial development in urban areas.
Mrs. Clinton said her proposal would also expand access to grants for smaller startups.
“My plan will help spur reinvestment in communities that have lost jobs because of factory closures,” she said in a statement Tuesday. “By strengthening our manufacturing sector for the future, we can help create the next generation of good-paying jobs and put more people back to work across the country.”
Critics say the plan isn’t the economic panacea that the Clinton campaign makes it out to be.
“There’s so much research out there that looks at the decisions of corporations to move to different places, and tax credits may play a small role in getting them to stay, but there are so many other overriding factors like labor costs and the value of the dollar that this plan won’t resolve,” said Mark Skidmore, an economics professor at Michigan State University.
Over the past year, the dollar has appreciated by as much as 30 percent compared with other currencies, making production much more expensive in the U.S., Mr. Skidmore said. That has given businesses a “huge incentive” to manufacture overseas, he said.
Mrs. Clinton’s manufacturing proposal comes on the heels of her $275 billion infrastructure plan announced last week. So far, Mrs. Clinton has proposed initiatives on the campaign trail that have surpassed $1 trillion in costs without detailing any specific plan on how they will be funded, while promising not to raise taxes on those earning less than $250,000 a year.
Michigan is one of the states hit hardest by the latest economic recession and is one Mrs. Clinton must win to blaze her path to the White House. Since Bill Clinton’s 1992 victory, Democrats have swept the state’s electoral votes in every presidential election.
“You have to do things to keep the base happy,” Larry Sabato, director of the University of Virginia’s Center for Politics, told The Detroit News. “That’s something not just for Michigan, but probably aimed at Ohio, Wisconsin and all of the Rust Belt states.”
On Wednesday, Mrs. Clinton’s team will outline a vision to end corporate inversions, which let the largest multinationals shift earnings overseas to avoid U.S. taxes and put American workers at a competitive disadvantage. Last month, Mrs. Clinton decried pharmaceutical giant Pfizer Inc.’s plan to merge with Allergan Plc. in order to move its tax base to Ireland.
“This proposed merger, and so-called inversions by other companies, will leave U.S. taxpayers holding the bag,” she said in a campaign-issued statement. “As president, I will fight to reform our tax system to reward growth, innovation, and job creation here in the United States. We cannot delay in cracking down on inversions that erode our tax base.”
On Monday, the Clinton campaign recommended an “exit tax” as a way to stop these inversions by essentially charging companies that move headquarters outside of the U.S. Part of the revenue generated from that tax would be used for her domestic manufacturing proposal, the campaign said.
Republicans also have addressed corporate inversions and the need to refuel the American economy as ways to attract middle-class voters.
The party’s presidential front-runner, Donald Trump, has promised to be “the greatest jobs president that God has ever created” and takes aim at companies that invest outside the U.S. in nearly every speech. Regarding corporate inversions, he has recommended lowering corporate taxes as a way to attract companies to keep their profits in the U.S.
Pfizer’s stated tax rate is 25.5 percent, but if it moves to Ireland, it will be charged 17 percent — a savings of more than $1 billion last year alone for the pharmaceutical company. Analysts estimate that U.S. companies overseas hold about $2 trillion worth of profits.
“There is no way you can stop it really other than lowering the taxes because right now … it is prohibitive to bring that money in,” Mr. Trump told Bloomberg News last month. “They’d have to pay so much, they’d have to be fools to bring it in.”
• Kelly Riddell can be reached at kriddell@washingtontimes.com.
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