Biden Breaking News, September 11, 2020

WHAT
On Wednesday, September 9, former Vice President Joe Biden spoke about his manufacturing “Plan to Ensure the Future Is ‘Made In All Of America’ by All Of America’s Workers.”

WHY IT MATTERS
Biden outlined several new elements of his manufacturing plan. The new proposals include penalizing companies that move jobs offshore, incentivizing investment in domestic manufacturing with tax credits, and ensuring that federal government contracts help American workers. Biden promised to be the nation’s most union-friendly President. Biden said his policies will reverse the tide of factory closures in the American Midwest and could generate 1 million new jobs in the U.S. automotive sector.

Biden portrayed his proposals as a stark departure from the Trump administration’s policies. He said Trump administration contracts awarded to foreign companies rose 30 percent. He added that under his plan, this trend would be reversed.

Biden stated that 20,000 auto manufacturing jobs in Michigan have been lost under the Trump administration. He said the federal government needs to focus on modernizing American manufacturing and bring jobs back to the American heartland, which is the focus of the “Made In All Of America” plan.

KEY PROPOSALS

  1. Offshoring Tax Penalty – Biden stated that his administration would impose a tax penalty on companies that avoid paying U.S. taxes by offshoring American jobs and manufacturing, only to sell their goods to American consumers. A Biden administration would not only ensure that these companies will pay full U.S. taxes on their profits, but it will impose a 10% offshoring penalty surtax on offenders.
  2. Made In America Tax Credit – Biden said his manufacturing plan will now include a Made In America Tax Credit, which would be a 10% advanceable tax credit for companies that invest in the U.S. and American workers. If a company revitalizes a closing facility in the U.S., the federal government will cover 10% of the investment that company makes to reopen it.
  3. Federal Purchasing Power– A Biden administration would deliver on its promise to buy American. The U.S. government annually spends about $600 billion on federal contracts. A Biden administration would mandate that these contracts help American workers.
  4. Made In America Office – Biden stated that his administration would establish an office in the White House dedicated to ensuring that everyone is playing by the same Made In America rules.
  5. Transitioning Vehicles – Biden said the U.S. government will convert its fleet of federal vehicles into electric vehicles by giving contracts to American automobile companies. Biden said his administration would work to build a network of 500,000 electric vechicle charging stations across the country. He added that his administration would offer rebates and incentives to swap older vehicles for new fuel-efficient models.

OUR TAKE
Former Vice President Biden’s tax proposals to encourage domestic manufacturing continue a tradition of Democratic presidents’ and presidential candidates’ carrot-and-stick approaches to discourage offshoring. In 2016, candidate Hillary Clinton proposed several tax changes related to corporate inversions and earnings stripping to encourage U.S.-based global businesses to keep more jobs in the U.S. Clinton also considered a cut in the corporate tax rate. President Obama’s FY16 budget included a proposal to simultaneously lower the top corporate rate and impose a new 19% minimum tax on global profits.

Biden’s announcement in Michigan on Wednesday was the campaign’s latest effort to differentiate the former Vice President’s economic proposals from President Trump’s economic record and to draw attention to the ongoing loss of manufacturing jobs in swing states. According to the Department of Labor’s Bureau of Labor Statistics, in 2019, pre-COVID, Michigan, Wisconsin, Pennsylvania and Ohio lost a total of 16,000 factory jobs. Both the Biden and Trump campaigns will spend a significant amount of time in the Rust Belt from now until election day. They will campaign on their differing visions of economic recovery. We can expect to see additional proposals in the weeks ahead.

Biden’s proposals on Wednesday build on his previously announced plan to require corporations to pay a 15% minimum tax on their book income as well as his proposal to double the existing minimum tax on profits earned by foreign subsidiaries of U.S. firms, from 10.5% to 21%. This anti-base erosion minimum tax, the Global Intangible Low-Tax Income (GILTI) provision, was included as part of the 2017 tax law. Unlike recent Democrats at the top of the ticket, Biden has said he would raise the corporate tax rate, which could encourage companies to move some operations to lower tax jurisdictions, absent robust anti-base erosion measures.

Biden’s 10% offshoring tax and new Made in America Tax Credit would require congressional action. Its success or failure would depend on which party controls the Senate. A Democratic Senate majority could consider both pieces of the Biden plan as part of a budget reconciliation bill, which would require only a simple majority for passage.

Beyond congressional action, the Biden campaign has announced that a President Biden would take a range of executive actions during his first week in office, directing the federal government to buy American goods and support American supply chains in the procurement process.

WHAT’S NEXT?
This week’s proposal from the Biden campaign is not the first and is unlikely to be the last manufacturing policy announcement as the campaign enters the post-Labor Day homestretch.

RESOURCES

  1. Made In All Of America Plan via Biden campaign website
  2. Video and transcript of the speech