Jay Timmons, National Association of Manufacturers CEO, joined Yahoo Finance Live to discuss his thoughts on Biden's infrastructure plan and the propsed corporate tax rate hike.
- We first, though, want to get to President Biden laying out his plan on infrastructure. Higher taxes may come as a result. Jay Timmons is joining us now. He's the CEO and President of the National Association of Manufacturing.
Jay, it's great to see you again. One of the ways that President Biden is proposing to pay for this plan is through higher corporate taxes. You say, through a new study that you have, that this will be a job killer. How so?
JAY TIMMONS: Well, first of all, infrastructure itself is not a jobs killer. It is a jobs creator. So I want to put that out there that we very much are excited that the president has offered a very bold and substantial plan for investment in infrastructure.
The way to pay for it is really the key here. And that's the question at hand. We had commissioned the study, I think, nine, 10 months ago, based on what we were hearing from the candidates on the campaign trail about what their proposals for various tax policies would be.
So we built that over time. It was finally completed. And what we found, Seana, is that an increase in the corporate tax and increasing taxes on pass-through entities would really kill about a million jobs over the next two years. And the worst number is actually six million fewer jobs over the course of the next 10 years.
And so we really want to work with the administration. We want to work with Congress to yes, have a substantial investment in infrastructure, but paid for a little differently.
- Well, Jay, walk us through just some of those ways that you would propose that the administration could go about paying for this.
JAY TIMMONS: So that's an excellent question, Emily. Look, I think it is incredibly important to look at all alternatives. And if folks want to see what the actual proposals are from the NAM, they can go to nam.org.
We have a program called-- or a plan called-- Building to Win. And we issued that about three years ago. And those recommendations are still salient today.
But basically, it boils down to user fees, bonds, and debt, and also a public private partnership. Now, I want to specifically talk about debt and the importance of debt when you're referring to capital projects, like infrastructure, that will make us competitive and strong for generations. That's the appropriate use of debt.
I'm very, very aware that suddenly, some people have gotten new religion about that after spending $5.5 trillion in 10 months. What we're talking about here or what the President has proposed is $2.2 trillion over 10 years. I'm sure we can find at least part of that that we can fund through debt. The American people are willing to pay for projects that will keep us strong, and healthy, and vibrant for generations.
- And Jay, the National Association of Manufacturing Study looked at that corporate tax increase of up to 28% from the 21% currently. But what about a more mild increase to 25%? Because it seems like that seems to be the level that more moderate Senate Democrats are favoring and what might ultimately come to fruition.
JAY TIMMONS: Yeah, look, I mean, I get it. And I understand that well, we know that 28% is going to kill jobs. So maybe we should make it 25%. And so basically, what they're saying is we don't want to kill a million jobs, but we're OK with killing another number of jobs.
And we just don't find that acceptable. Look, back in 2017, when manufacturers were successful in getting tax reform-- comprehensive tax reform-- we made some promises. We promised to invest in America, hire American workers, and raise wages and benefits, we did exactly that.
And in fact, the year after that, manufacturers added 263,000 jobs. That was the best increase in job creation in 21 years for manufacturing. That was the power of lower taxes for businesses.
We also increased wages by 3% in 2018-- almost the same in 2019, and 3% in 2020, even during a pandemic. We were only able to do that, because of the fuel that tax reform provided to businesses of all sizes.
- Jay, one thing that we've seen, as a result of the COVID pandemic and the economic recession, or the massive pullback that we've seen over the last year has been a stronger divide in inequality. And I bring that up because Jamie Dimon-- he was out with a shareholder letter earlier this week. And he was making the argument that he was backing higher corporate taxes. Because it would help address some of those fundamental challenge inequities that we do have in our society. So if we go about funding this in a different way, I guess, do you have any thoughts just in how that could further exacerbate some of the inequality that we currently do have in our economy right now?
JAY TIMMONS: Well, I don't think public private partnerships fuel inequality. I actually think that it helps bridge that divide. And certainly, if you're going to spend dollars on capital projects and finance some of that with bonds, that's investing in our future. That's not harming or further exacerbating income inequality.
Look, I commend Jamie Dimon for bringing up a very difficult issue. We probably don't agree though if he is calling for that-- I wasn't aware of that-- if he's calling or whoever is calling for increased taxes on businesses. Because manufacturers can't pass those costs along.
And it ends up hurting all consumers. It ends up hurting all Americans. It hurts our ability to be able to invest in new plants and equipment. It hurts our ability to hire new workers.
Right now, we know that we have half a million open jobs in manufacturing today. That number grows to 2.4 million by the year 2028. And we certainly don't want to see that number shrink. We want to be able to provide tremendous job opportunities for Americans. And that's the way you address income inequality.
Now, if you're a service sector company or a non-manufacturing entity, you can oftentimes pass on the cost of a tax increase or the cost of doing business. That just doesn't happen with manufacturing here in America, because we have competitors all over the world that are trying to figure out how to lower their costs and take jobs away from us. We don't want to see that happen.
- And Jay, in that same vein, looking at how companies actually spent that boost that they got from the lowered corporate tax rate several years ago, at least according to data from Deutsche Bank, for S&P 500 companies, much of that actually went to corporate buybacks. Yes, some of it did go to capital expenditures, as you're talking about. But again, a lot of that went back to enriching these shareholders in these companies. And what would you say to those who are bringing up that, as being a proponent then of actually raising the corporate tax rate, in order to return some of this value into the broader economy?
JAY TIMMONS: I think there's a great question. And I appreciate you asking it. When you invest in a new plant or equipment, that takes, sometimes, years of planning. So it's not as if all that money can be plowed into those investments and hiring new workers to staff those plants, you know, just a few months after you have this new law in effect.
Our manufacturers have been planning for a multi-year buildup of investment and job creation. So we were able to do a significant amount of that in 2018, and 2019, and even 2020, as I mentioned. You'll see that number expand even more over the next few years.
As far as companies trying to reduce their debt load, it's probably a good idea, to be honest, to be able to have a healthy bottom line for these companies, so that when they do have cash in hand, they can then begin to invest even more than we have anticipated. I just think you're going to see this amazing Renaissance in manufacturing.
We're already seeing it. We're already in the middle of it. And I don't want to peel that back with archaic tax laws that we worked 30 years to overcome.
We're finally competitive again on the global stage. And I don't want to lose that advantage. I want to see manufacturing shine in this country. Because we know that every manufacturing job creates, like, four to five more jobs in other sectors of the economy. And it adds about $1.80 in new investment for every $1 invested in manufacturing-- $1.80 in other sectors.
So this is a win-win. Let's get the roads, and bridges, and infrastructure, the drinking water, and the sewage lines that the administration is talking about-- let's get that built. Let's commit to that. And let's figure out a way to pay for it that would be a win-win for President Biden to get this in place-- to get these programs in place-- this investment, the businesses being able to hire, and Americans, who will have better infrastructure for generations to come.
- Jay Timmons, CEO and President of the National Association of Manufacturing. Always great to speak with you. And we look forward to having you back again soon.