Why A Lower U.S. Corporate Tax Rate Is Important For Manufacturing And Metals

The National Association of Manufacturers (NAM) has released a short document that explains why the United States’ 21 percent federal corporate tax rate, which was reduced from 35 percent as a result of a tax reform package signed into law in 2017, is important to the manufacturing industry. While that reduction is permanent — it is not set to expire like other important provisions that were included in that law — several candidates running for federal office in the 2024 election have expressed a desire to increase the rate again.

According to NAM, reducing the tax burden on manufacturers led to increased investment throughout the United States, along with heightened job creation, wage growth, and overall economic expansion. In 2018, the year the lower rate took effect, for example, manufacturers had their best year for job creation in more than two decades, generating more than 260,000 new positions and increasing wages by three percent, the fastest pace in 15 years. Additionally, NAM surveys conducted prior to the 2017 tax reform bill found nearly 80 percent of manufacturers were struggling with unfavorable business conditions like high taxes. That figure dropped to just 12 percent following the reduction in the corporate rate.

What would happen if lawmakers approved legislation to raise the corporate rate? In a recent survey, NAM found:

• 73 percent of manufacturers would limit capital investment;
• 65 percent of manufacturers would reduce hiring; and
• 52 percent of manufacturers would curb investment in research and development.

Raising the corporate rate also would make U.S. manufacturing and metals industry companies less competitive against their global counterparts. Indeed, even with the 2017 reform, the United States has the 22nd highest corporate tax rate among the 38 countries in the Organization for Economic Cooperation and Development (OECD). (The United States had the highest rate among OECD countries prior to the 2017 tax reform bill taking effect.)

Read NAM’s tax explainer here.