Tax Bill Potential Boon for Bakers, Suppliers
For the first time in 30 years, Congress has passed a major overhaul of the tax structure, especially for businesses. Spurred by the desire to kick lagging economic growth into a new gear, Republican leaders in Congress joined with the White House and key economic advisors to persevere through a tumultuous political environment to accomplish what many in Washington thought couldn’t be done. It also important to note that under the leadership of the U.S. Chamber of Commerce and the National Association of Manufacturers (NAM), the business community in Washington, by and large, kept their collective eye on the big prize rather than disintegrating into narrow provisions and carve-outs.
Despite the many turns to get to passage, the tax package that was signed into law was remarkably simple and clean. The champions in Congress stuck to several core principles, such as slashing corporate and small business taxes, doubling the standard deduction that will simplify filing taxes for millions of working Americans, and providing significant incentives for capital projects, as well as research and development. Overnight, American companies went from the highest tax rates in the world to among the lowest. According to NAM, this is a dream tax bill for manufacturers.
While each baker and supplier will be determining the exact impact and opportunities for his or her company, in aggregate, the package will have tremendous benefit. The immediate write-off of the full cost of new equipment alone will likely boost additional investment in new plants and equipment. The reduction in corporate rates should provide resources to address many workforce challenges.
In the immediate aftermath of the passage of the tax bill, many companies – large and small – announced that they were reinvesting back into their number one asset: their employees. In addition, many companies announced aggressive capital expenditure programs and plans to relocate their manufacturing back to the United States. These are all good stories, but the promise of accelerated economic growth will only be realized if these reinvestments are sustained over time.
Several years ago, former Florida Governor Jeb Bush spoke at the ABA Convention and provided a clear-eyed look at the impact that increasing our growth rate (at the time, an anemic two percent) to a more traditional 4-5% post-recession growth rate would have on addressing serious national challenges. While it wouldn’t solve all our problems, the additional economic benefits, including federal and state revenues, could provide a lot more flexibility and options for addressing them.
There is a lot for the baking industry to be excited about with the passage of tax reform and the regulatory rollback of the past year; however, there are some cautionary concerns. The biggest of which is – Where is the industry going to find the skilled workforce to address its current and future needs? ABA is working with industry leaders and experts, along with potential industry partner organizations, to develop collaborative solutions to this challenge. Additionally, the same political environment that produced the tax reform package could reverse the benefits by creating detrimental trade conflicts or by making a challenging immigration policy worse. Is it too much to hope that one good action by Washington will lead to more good actions?!