President-elect Donald Trump threatened U.S. companies with hefty penalties if they expatriate jobs and capital Thursday during a speech at the Carrier Corp. plant in Indianapolis.
For years, large American corporations have moved their operations outside the nation’s borders to seek cheap labor and evade the burdensome U.S. corporate tax rate. The U.S. has the third highest corporate income tax rate in the top 35 industrialized nations, and has comparatively more expensive hourly labor costs than many other nations. (RELATED: How The US Corporate Tax Rate Measures Up To Other Nations)
As President-elect Trump noted several times during his campaign, many companies are outsourcing jobs to Mexico, Ireland, and other nations as a result of the burdens imposed on business in the U.S. (RELATED: More Companies Moving To Mexico, Finding Fewer Laborers To Fill Jobs)
Carrier, an air-conditioning, heater and refrigerator manufacturer, announced in February that it would close two Indiana plants and move its operations outside of U.S. borders, leaving 1,400 workers out of a job. Trump struck a deal with Carrier Tuesday, ensuring that the company would keep nearly factory 1,000 jobs in Indiana.
At a rally celebrating the deal, Trump warned U.S. companies against shifting jobs overseas.
“Companies are not going to leave the U.S. anymore without consequences … Leaving the country is going to be very, very difficult,” Trump told the crowd at the Carrier plant in Indianapolis Thursday.
The president-elect offers an out for firms that are currently outsourcing their labor and operations offshore. Trump proposes a one-time tax for domestic businesses with trillions of dollars overseas, in efforts to incentivize these companies to bring their foreign capital back to the United States.
Trump has other plans to ensure a more business friendly environment in the U.S., which include lower the corporate income tax rate from 35 percent to 15 percent, and lowering the tax brackets from seven down to three. (RELATED: A Comprehensive Look At President-Elect Donald Trump’s Tax Plan)
Not everyone is happy about Trump’s deal with Carrier. Following his speech at the Carrier plant, Bernie sanders tweeted out:
Trump’s Carrier deal shows corporations they can:
Threaten to outsource jobs
Actually outsource jobs
Still get a tax cut
— Bernie Sanders (@SenSanders) December 1, 2016
Tax experts note that deals like the one Trump negotiated with Carrier are bad policy. “No amount of ‘deals’ can ever truly put this issue to rest, only comprehensive tax reform can,” Scott Drenkard, director of state projects for the Tax Foundation, writes.
“Some of the draw for companies to move a manufacturing plant to Mexico is based on labor costs, and the United States doesn’t necessarily want to compete on having the lowest wages of any country. However, we can compete on having a simple, low rate, broad-based business tax code,” Drenkard says.
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