The Wages of Business’s New Tax Messaging
Thirteen months from now, $4 trillion in tax increases will take place if Congress doesn’t renew the Tax Cuts & Jobs Act. The business world is ready, flexing its muscles in Congress and preparing to push hard for its interests once President-elect Donald Trump enters the White House.
But what the industry may find is that President Trump 2.0 has different priorities than the Trump who pushed the TCJA through in 2017. The anti-corporate, worker-focused coalition that carried him into office for a second time rejects traditional narratives prioritizing business profits and stock prices, especially as grocery prices and inflation remain high.
This means that industry’s tax messaging needs to prioritize workers – or it may face Trump’s wrath instead of favorable tax provisions.
In 2017, the corporate tax reduction, accelerated depreciation, and Qualified Business Income deductions for pass-through entities were major parts of tax reform. Business as a whole benefited along with workers. But this time around, Trump’s talking points have centered around pro-worker narratives, like his promises of eliminating taxes on tips, overtime pay, and Social Security benefits. And one of his early actions as President-elect has been to pick a Teamsters-approved Secretary of Labor.
This doesn’t mean that Corporate America is out of luck. It simply means that its policy advocacy on matters such as the Global Intangible Low-Taxed Income tax must downplay corporate profits and highlight the benefits to job creation, wage growth, and overall economy stability for workers.
Critics argue that these provisions benefit multinational corporations at the expense of domestic priorities, businesses must make the case that a fair international tax system levels the playing field. But by taxing foreign income at a competitive rate, companies are better able to retain earnings and reinvest them in their U.S. operations. This leads to higher domestic wages, job creation, and greater economic stability, ultimately benefiting workers and their families. Lawmakers should ensure that international tax policies don’t unfairly penalize companies for expanding globally, but instead create an environment that encourages American businesses to grow internationally while maintaining robust domestic operations.
The same narrative should be used to defend corporate tax reductions like the one in 2017 which dropped the rate from 35% to 21%. This move helped U.S. companies compete on the global stage while allowing American businesses to invest in assets and in human capital, driving growth and economic prosperity. These same investments create a brighter future for workers by offering room for higher wages and shield consumers from yet more price hikes that will ensue if corporate interests take a hit when the TCJA lapses.
Another provision that directly benefits workers is accelerated depreciation. Under the TCJA, businesses can immediately deduct the cost of capital investments—such as machinery, equipment, and technology—rather than spreading those deductions over several years. This tax incentive, known as “bonus depreciation,” encourages businesses to invest in their operations, upgrade their equipment, modernize their infrastructure, and innovate. Workers can perform tasks more efficiently or find more complex, high-value work – leading to higher wages. For instance, an American energy company investing in new automated systems or robotics will probably need fewer oil rig workers – but it will probably need more technicians and engineers. These investments can revitalize downtrodden communities, many of whom supported President-elect Trump due to their belief in his promises to give them a better life.
At this time of severe economic strain, no politician wants to be on the side of windfalls for corporate executives. It is incumbent on CEOs and their Washington surrogates to emphasize that a TCJA extension will result in better wages, improved benefits, and more job opportunities – which in turn helps workers feel like partners in their employers’ success.
By advocating for policies that bolster business growth while simultaneously fostering job creation and higher wages, business leaders can ensure they don’t get the short end of the stick in the upcoming tax reform debate. In doing so, it will also help secure a brighter future for American workers.
This piece was originally published by Kelly Ferguson & Dustin Siggins at Real Clear Markets.
