OPINION:
When President Trump signed the Tax Cuts and Jobs Act into law last year, he restored America’s competitive edge on the global stage. The law reduced the tax burden for American businesses, helping raise wages and bonuses, creating new jobs, and generating other meaningful benefits for American workers. Arkansas employers large and small are passing tax reform savings along to their employees in all corners of our state.
Despite the resounding success of Mr. Trump’s historic achievement, regulations recently put forth by Washington bureaucrats aim to foil his formula for prosperity; effectively increasing taxes on some American companies, the American workers they employ and the American consumers they serve.
New regulations proposed by the Department of the Treasury — regulations that sharply deviate from congressional intent — would bar U.S. producers of beer, wine and distilled spirits from participating in the program commonly referred to as substitution duty drawback.
Substitution duty drawback is a program that gives manufacturing companies a tax benefit on goods they import into the U.S. if they also domestically produce and export a commercially similar good, at a one-to-one ratio. This encourages companies that would otherwise just rely heavily on imported goods to also grow their domestic production. This, in turn, creates American manufacturing jobs, stimulates the economy and increases the number of American-made products being sold around the world.
The intricacies of duty drawback — and more specifically, the implementing language for Section 906 of the Trade Facilitation and Trade Enforcement Act of 2015 — surely sound complex, but the consequences are clear. Not only would these regulations reverse production growth and hinder job creation in our state, but they directly conflict with President Trump’s vision of “Buy American, Hire American.” If these regulations go through as currently written, our state of Arkansas stands to miss out on more than $12 million in annual payroll. That’s $12 million that will likely be spent to manufacture these products in other countries, instead of going into the pockets of hard-working Arkansans and boosting our economy.
While our world has certainly changed since our Founders first established duty drawback in 1789, the need for this program is as great as ever. As I recently wrote in a letter to President Trump and senior members of his administration, the ability to drawback duties on imports incentivizes companies to move production of exports to domestic facilities rather than just produce them abroad. This creates good-paying American jobs in states like mine.
Take our country’s wine industry, for example. As data from the Commerce Department reveal, U.S. wine exports have essentially doubled — going from $796 million in 2004 to $1.53 billion in 2018 — since producers were able to utilize the substitution drawback program. The economic benefits of doubling the wine industry’s exports across the wide-ranging supply chain it generates cannot be disputed. Nor can the positive effect that this increased business has on the countless workers who support this industry like bottlers, glass and packaging manufacturers, and farmers who harvest the raw resources necessary for production.
Now, consider the downstream consequences of arbitrarily prohibiting certain major U.S. manufacturing sectors from enjoying this job creating program on which many other industries rely. Depriving the U.S. economy — depriving American workers - of increased exports for the industries in question wouldn’t, as the Treasury claims, “correct an improper practice.” It would create an improper practice. With so much concern over America’s trade imbalances; the Trump administration should be incentivizing all industries to increase exports, not just the ones it deems worthy.
Since his election, I have been pleased with Mr. Trump’s tenacity in protecting, supporting and creating good-paying American manufacturing jobs in states like Arkansas. That is why I am proud to stand with all six members of Arkansas’ congressional delegation — as well as with elected officials across the United States and spanning the ideological spectrum — in calling for him to continue this effort by supporting both the preservation and expansion of this vital job-creating program.
• Asa Hutchinson is the governor of Arkansas.
Please read our comment policy before commenting.