{ "id": "R42742", "type": "CRS Report", "typeId": "REPORTS", "number": "R42742", "active": true, "source": "EveryCRSReport.com, University of North Texas Libraries Government Documents Department", "versions": [ { "source": "EveryCRSReport.com", "id": 443678, "date": "2015-08-03", "retrieved": "2016-04-06T18:40:58.143615", "title": "Federal Tax Benefits for Manufacturing: Current Law and Arguments For and Against", "summary": "Fueled in part by certain policy initiatives advocated by President Obama, a lively debate over whether additional federal assistance should be provided for manufacturing is taking place among some analysts and lawmakers. Several issues are central to the debate: (1) the contributions of manufacturing to the performance and growth of the U.S. economy, (2) whether the federal government should do more to promote the growth of the sector, and (3) if so, what measures would be likely to have the intended effect? \nThe federal government supports manufacturing in a variety of ways. This report focuses on the support provided through the federal tax code. Current federal tax law contains nine provisions with the potential to provide significant tax relief to firms primarily engaged in manufacturing. A few are targeted at manufacturing, while the others offer more benefits for manufacturers than for firms in most other sectors. The most important provisions, ranked on the basis of estimated foregone revenue, are the deferral of the active income of controlled foreign subsidiaries of U.S.-based corporations, the research tax credit, the expensing of outlays for research and experimentation, and accelerated depreciation for a variety of capital assets.\nA number of proposals are being considered in the 114th Congress to expand federal tax benefits for the manufacturing sector. Some of the bills would create new tax incentives intended to increase domestic investment and job growth in manufacturing. Their prospects for passage have become intertwined with the growing debate in Congress over reforming the federal tax code. Most proponents of tax reform favor an approach that would combine a broadening of the income tax base (e.g., by eliminating certain business tax incentives) with a lowering of corporate and individual tax rates, in a revenue-neutral fashion. Such an approach could have a significant effect on the taxes paid by many manufacturing companies.\nProponents of boosting federal assistance for manufacturing say the added support would benefit the U.S. economy in several important ways. In their view, a revitalized manufacturing sector might enable the United States to derive more of its economic growth from exports and domestic production than it has in the past two decades or so. Proponents also contend that average domestic wages would be likely to rise in response to growing manufacturing output, as manufacturing jobs historically have paid higher wages and benefits, on average, than have non-manufacturing jobs. In addition, according to proponents, a growing manufacturing sector would help lay a foundation for future U.S. economic growth, since manufacturing industries perform the vast share of private-sector research and development (R&D), which fuels the innovation that serves as a primary engine of economic growth. Finally, proponents argue that the United States would lose its long-standing leadership in advanced manufacturing technologies in the absence of increased federal support for manufacturing R&D and worker training.\nCritics of greater federal assistance for manufacturing maintain that there is no economic justification for additional support. In their view, in the absence of a market failure linked to goods production in general, government aid for manufacturing should be decreased or eliminated, not increased. Critics also say that promoting job growth in manufacturing would do little to create the millions of jobs needed to bring domestic full-time employment back to the levels that prevailed on the eve of the severe recession from 2007 to 2009. And, say critics, U.S. gross domestic product and employment would receive a greater boost from federal initiatives to dismantle foreign barriers to expanding exports of services than from targeted assistance aimed at boosting the competitiveness of U.S. manufacturing companies.", "type": "CRS Report", "typeId": "REPORTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/R42742", "sha1": "d2d85aaef68cd391aae3165446371692573957ac", "filename": "files/20150803_R42742_d2d85aaef68cd391aae3165446371692573957ac.html", "images": null }, { "format": "PDF", "encoding": null, "url": "http://www.crs.gov/Reports/pdf/R42742", "sha1": "327699e7e8349348e09a0b5c230a5cac6b0300b5", "filename": "files/20150803_R42742_327699e7e8349348e09a0b5c230a5cac6b0300b5.pdf", "images": null } ], "topics": [ { "source": "IBCList", "id": 4602, "name": "Manufacturing Policy" }, { "source": "IBCList", "id": 571, "name": "Business Taxation" } ] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metadc810411/", "id": "R42742_2012Sep20", "date": "2012-09-20", "retrieved": "2016-03-19T13:57:26", "title": "Federal Tax Benefits for Manufacturing: Current Law, Legislative Proposals, and Issues for the 112th Congress", "summary": null, "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20120920_R42742_bc10412dc7a16a1fb59f98afe51e2a66e98d5fcc.pdf" }, { "format": "HTML", "filename": "files/20120920_R42742_bc10412dc7a16a1fb59f98afe51e2a66e98d5fcc.html" } ], "topics": [] } ], "topics": [ "Economic Policy", "Foreign Affairs" ] }