New Manufacturing Tax Plan

After four years of complaining that the U.S. tax code encourages foreign outsourcing of jobs and production, President Obama has unveiled a corporate tax plan he thinks will reverse the trend. The second bullet in his 23-page corporate tax overhaul proposal released on Feb. 22, is “Strengthen American Manufacturing and Innovation,” which states:

“The manufacturing sector plays an outsized role in the U.S. economy with significant spillovers to other sectors that make it particularly important to future job creation, innovation and economic growth.”

U.S. manufacturing enterprises are engaged in a global economic battle whose outcome is being determined in part by the tax structure of the U.S. and other nations. As such, the Treasury Department proposes the top corporate tax rate on manufacturing income be cut to 25 percent “and to an even lower rate for income from advanced manufacturing activities by reforming the domestic production activities deduction,” says the plan.

The plan simplifies and makes permanent the R&D tax credit at 17 percent. It would make permanent the tax credit for the production of renewable electricity “in order to provide a strong, consistent incentive to encourage investments in renewable energy technologies like wind and solar.”
The plan also calls for companies to receive a 20 percent income tax credit for expenses associated with moving operations back to the United States, as opposed to the current system that “allows companies moving operations overseas to deduct their moving expenses and reduce their taxes in the United States as a result.“

It would allow small companies to expense up to $1 million in investments; allow cash accounting on businesses with up to $10 million in gross receipts; double the deduction for start-up costs; and expand the health insurance tax credit for small businesses.

The 23-page plan (worth reading) is located at: http://tinyurl.com/7vceyo3