The hits just keep on coming. It looks like the self-described “great negotiator” is giving away our tax dollars to a company he promised to “penalize” – even before taking office.
Trump’s Promise: They’re “Going To Pay A Damn Tax”
During the campaign air conditioning and furnace manufacturer Carrier, a subsidiary of giant United Technologies, announced it was laying off about 2000 Indiana employees and moving manufacturing to Mexico. President-elect Trump singled out Carrier, promising to penalize companies like Carrier that ship jobs out of the country by making them pay a tax for doing so:
“There have to be consequences when they leave,” he said at a rally Wednesday. “You’re going to pay a damn tax when you leave this country.”… “You’re looking at a situation in our country where our jobs are being ripped out of our states … like candy from a baby,” Trump said.
About Carrier specifically, Trump promised this. Reuters reported:
Republican presidential candidate Donald Trump said he would impose taxes on Carrier air conditioning units manufactured in Mexico in light of the company’s decision to move production from Indiana, a position in line with his strong opposition to international trade deals.
Then just days before the election he gave a specific number. Bloomberg reported:
“If a company wants to fire their workers in North Carolina or in this country, move to another country and then try to ship their product back into the United States, we will apply a 35% tax to those,” Trump says at rally in N.C.
That Was Then, This Is Now
Trump promised that when he wanted to get vote from working people. That was then.
But this is now, after he got votes from working people. Times change and he’s singing a different tune. Corporate America is where it’s at, baby. Republicans understand they have to say one thing before the election and then after the election they dance with them that brung ’em.
Trump has announced a deal with Carrier, apparently giving away the farm. No “penalizing.” No “tax.” No “35% tariff.” Instead: hand them the (tax) farm and claim victory.
It looks like this is the deal (we don’t really know because the announcement is vague and so far, at least, Trump doesn’t do press conferences): in exchange for Carrier delaying (for an undetermined amount of time) moving “some” of the jobs, Carrier (and the rest of corporate America) could get a massive, huge, amazing, unprecedented, vast, unbelievable giveaway of our tax dollars.
Word is that the Carrier deal involves a promise of “corporate tax reform”. The Wall Street Journal explained few days ago, in, “Deal for Carrier to Keep U.S. Plant Open May Hinge on Tax Overhaul.” Tax “reform” and “overhaul” are code-words for cutting the corporate tax rate, letting corporations keep the near-$1 trillion of taxes they now owe on profits stashed in tax havens, and on top of that eliminating taxes on offshore corporate (apparently income to encourage companies to move the rest of their production and profit centers out of the country).
Politico, referencing the WSJ report, explains, in “Taxes enter the Carrier debate:”
The Wall Street Journal reports that Carrier’s parent company, United Technologies Corp., has been talking up the need for tax reform with Trump’s team, ahead of the GOP’s push for the first tax overhaul in a generation next year.
As the WSJ notes, about 85 percent of United Technologies’ $6 billion in reserves were offshore when 2015 ended, so the company’s got good reason to want to access that cash at a lower tax rate. (Not to mention that, like most multinationals, United Technologies wants a lower U.S. corporate rate.)
Bryce Covert explains further, at ThinkProgress, in “Trump abandons campaign promise to penalize outsourcing, offers tax breaks instead“:
In order for Carrier to keep jobs in the U.S., the Trump administration has discussed relaxing business regulations and backing away from campaign pledges to impose tariffs on companies that move jobs abroad, according to the Times.
The other concession under discussion, according to the Journal, is indulging the company’s desire for favorable changes to the tax code. One particular offer could be a tax holiday on overseas profits, given that United Technologies held 85 percent of its total cash, coming to more than $6 billion, overseas as of the end of last year.
Currently, U.S. corporations can indefinitely delay paying American taxes on money made abroad by keeping it abroad, but Trump has pledged to give U.S. corporations a one-time 10 percent tax rate on overseas profits as a way of enticing them to bring the money back. Evidence from past attempts at this very strategy, however, showed that companies simply used the break to bring their money back and give it to wealthy investors, rather than investing it in American jobs or the economy. The same thing is likely to happen this time around.
Another incentive for Carrier to keep jobs in the country could be an overall lower corporate tax rate. Trump has already proposed more than cutting the rate in half, lowering it from its current level of 35 percent to 15 percent.
This tells us a bit about the incoming administration, and it sets a terrible precedent. All a company has to do is threaten to move jobs out of the country and Trump will hand them enormous amounts of taxpayer cash. Not quite what he said during the campaign. In fact, it’s the opposite.