Posted on 03/27/2004 10:04:19 AM PST by GailA
New Study Says External Costs Are Primary Competitiveness Challenge to U.S. Manufacturing
03-330 CONTACTS: HANK COX (202) 637-3090; JIM ENGELHARDT (703) 841-9000
Cost Burden Reduces Innovation and Jobs
WASHINGTON, D.C., December 9, 2003 – “External, non-production costs add approximately 22 percent to unit labor costs of U.S. manufacturers (nearly $5 per hour worked) relative to their major foreign competitors, and are the primary competitive challenge facing manufacturers and their workers,” said Jerry Jasinowski, President of the National Association of Manufacturers.
The finding is part of a new study, “How Structural Costs Imposed on U.S. Manufacturers Harm Workers and Threaten Competitiveness,” by economist Jeremy A. Leonard. Funded by EMERSON, a major manufacturer of industrial equipment based in St. Louis, Mo., the study was released today by the NAM and the Manufacturers Alliance/MAPI.
“Severe global competition has caused manufacturing product prices to decline for the past seven years while non-production costs are skyrocketing,” Jasinowski said. “A recent survey of the NAM Board of Directors found that these extra costs are the number one competitive challenge facing manufacturers, reducing investment, innovation and job creation. We are essentially shooting ourselves in the foot competitively by making it too expensive to make products in America.
“This report comprehensively documents these extra costs – corporate tax rates, employee benefits, tort litigation, regulatory compliance and energy – and estimates them at approximately 22 percent of the price of production for U.S. firms relative to our nine most important trade competitors,” Jasinowski said. “These external costs are twice the size of the average direct labor costs of U.S. manufacturers, and are a major factor in our loss of trade and jobs.”
Thomas J. Duesterberg, President and Chief Executive Officer of the Manufacturers Alliance/MAPI, said the new study for the first time provides a comprehensive analysis of the unique cost burden carried by U.S. manufacturers. “Now that the magnitude of these underlying costs pressures is understood, it is important that federal and state officials begin to address them with new pro-manufacturing policies,” he said. “Foremost among these should be tax, regulatory, health and legal reforms.”
The Leonard study introduces a “raw cost index” for manufacturers that compares the competitiveness of U.S. producers with those in its nine largest trading partners, and compares costs before and after the cost multipliers have been weighed. “This study dispels the myth that most of our industrialized partners face higher manufacturing costs than we do,” Leonard said. “Shifts in international trade trends have generally been masked and our report shows that American trade is increasingly with developing countries where production costs are considerably lower than in the U.S. Our corporate tax burden is heavier than in eight of our nine largest trading partners, and pollution-abatement costs are significantly higher than in most other developed countries, including the so-called ‘green’ economies of Western Europe.”
“U.S. manufacturing has demonstrated the ability to overcome pure wage differentials with trading partners through innovation, capital investment and productivity,” said James Berges, President of EMERSON. “But when the additional external costs described in this paper are piled on, the task becomes unmanageable, even in the best companies.”
“There are many self-proclaimed friends of manufacturing expressing concern who are nowhere to be seen when these excessive non-production costs are on the table,” said Jasinowski. “Taken together, external non-production costs have offset a large part of the 54 percent increase in productivity achieved since 1990. It is imperative that our elected representatives at all levels take a hard look at the costs created by their actions – and sometimes lack of action – and the impact on our economy. We simply must forge a more pro-worker, pro-manufacturing climate if our industrial leadership is to be maintained and strengthened.”
The attached fact sheet summarizes many of the key conclusions of the new study which was a joint undertaking of the Manufacturers Alliance/MAPI and the NAM, and was issued by the Manufacturing Institute, the research arm of the NAM. You can access the full report at http://www.nam.org/costs.
The National Association of Manufacturers is the nation’s largest industrial trade association. The NAM represents 14,000 members (including 10,000 small and mid-sized companies) and 350 member associations serving manufacturers and employees in every industrial sector and all 50 states. Headquartered in Washington, D.C., the NAM has 10 additional offices across the country.
Be sure to visit our award-winning web site at www.nam.org for more information about legislative, policy and workplace developments affecting manufacturers, employees and the economy.
John Kerry's plan to soak his fellow rich guys won't rescue the budget
By Nolan Finley / The Detroit News
If John Kerry keeps this up, he’s going to get himself booted out of the Brahmins, shunned by the best yacht clubs on the Cape, banished from Beacon Hill and stripped of his St. Paul’s school tie.
Like many in politics, the Massachusetts senator has forgotten where he came from. He’s hiding his roots, showing up in boots. Trading his crested blazer for a Carhart work jacket. Crossing the street to avoid bumping into Meg and Scooter. Trying to sink below his raising.
The lad is even doing Elvis imitations.
This might be considered little more than a walk on the wild side for a member of the lucky sperm club.
But Kerry isn’t just slumming; he’s leading the charge against his old home boys.
Perhaps it’s a classic case of self-loathing. Since birth, Kerry has enjoyed the lifestyle of the rich and pedigreed, viewing the world from atop a hill where a million bucks barely buys a brownstone.
His own wealth is pegged at up to $20 million. But $20 million doesn’t buy what it used to. Fortunately, Kerry married a rich widow, who adds another $800 million to the nest.
But if you, too, make a decent buck or have a financially well-endowed spouse, don’t expect to find a compadre in John Kerry. The centerpiece of his economic policy is rolling back the tax cuts President George W. Bush handed the wealthy. By wealthy, Kerry means those who make more than $200,000 a year, or about what it costs to rent a parking space in Kerry’s old neighborhood.
Pinching the rich, Kerry says, will help restore the national budget to balance. The only problem is that Kerry’s club is too exclusive to be of any real help.
Even if Kerry delivers on his promise to make higher income earners pay the same tax rates as they did before the Bush cuts, it only trims about $27 billion from the $477 billion budget deficit, according to a study by Scott A. Hodge and J. Scott Moody of the Tax Foundation.
Also take away the tax breaks offered to investors, and Kerry would reap another $20 billion, Hodge and Moody say, still leaving a deficit of $430 billion.
So Kerry might as well slip back into his hand-tailored suit. The rich aren’t the problem. Neither are the tax cuts. Repeal the whole package, including the cuts that benefited the middle class, and the shortfall still stands at $313 billion.
The only way to get that number back to zero is by cutting government spending, which both Kerry and Bush helped increase by nearly 25 percent over the past three years.
As a campaign theme, “Stop the Spending” doesn’t have the same ring as “Soak the Rich.”
So Kerry continues to tell voters that the tax breaks he and his fellow fortunate sons got from Bush threw the budget out of whack and cheated the masses of health care, education and jobs.
It’s easy to whip up resentment against those who live better than the rest of us, whether they acquired their treasure through hard work and risk-taking or were born to it, like John Kerry — and, for that matter, George W. Bush.
But the tactic is both dishonest and divisive, particularly when applied by someone like Kerry, who never spent a day of his life outside the fraternity of the fabulously rich.
Nolan Finley is editorial page editor of The Detroit News. Reach him at nfinley@detnews.com or (313) 222-2064.; Watch Nolan Finley at 2 p.m. Sunday and 5:30 p.m. Friday on “Am I Right?” on WTVS-TV (Channel 56).
But Kerry isn?t just slumming; he?s leading the charge against his old home boys.No, he isn't. Kerry wants to tax income at greater rates, not simply wealth. Kerry and the rich actually make very little income; they shelter their estates in trusts and corporate fronts that award them token salaries but provide them with robust and plentiful, non-taxable benefits (homes, travel, properties and portfolios etc.). Kerry's proposal's do not affect his class at all: when Kerry says he wants to soak the rich, he means the working rich, the CEOs and upper management and entrepreneurs who actually earn their incomes.
They forgot the big ones: Individual Income Tax, Social Security tax, Medicare tax, Unemployment tax, and Workers Compensation tax.
The NRST would eliminate the first big three of these, and foreign products would have to share in paying the replacement tax.
The IRS Gets One Right
by Terence P. Jeffrey
Posted Mar 24, 2004
Joseph W. Barr served the shortest term of any U.S. Treasury secretary. But thanks to the Alternative Minimum Tax, which he inspired, Barr may cast a long shadow over the finances of middle-class America.
This is a cautionary tale about how tax-the-rich rhetoric can rebound on the middle class. The story also shows that even the Internal Revenue Service can get one right.
President Johnson appointed Barr on Dec. 21, 1968. On Jan. 17, 1969, three days before President Nixon's inaugural, Barr testified before Congress's Joint Economic Committee.
His testimony, immortalized on microfilm at the Library of Congress, was unabashedly political.
"Mr. Chairman," said Barr, "may I warn you that if this sounds a bit more like a stump speech than a statement by the secretary of the Treasury, that is precisely what it is intended to be."
For what did Barr stump? Tax hikes on the rich.
"I will hazard a guess that there is going to be a taxpayer revolt over the income taxes in this country unless we move in this area," he said. "Now, the revolt is not going to come from the poor. They do not pay very much in taxes. The revolt is going to come from the middle class."
Why? "(W)hen these people see, as I see," said Barr, "that in the year 1967, there were 155 tax returns in this country with incomes of over $200,000 a year and 21 returns with incomes of over a million dollars for the year on which the 'taxpayers' paid the U.S. government not 1 cent of income taxes, I think those people are going to say it is time to do something about it, and I concur."
Inspired by this testimony, as the Urban-Brookings Tax Policy Center noted in a 2002 study, Congress that year enacted a "minimum" tax of 10 percent, a complex device theoretically designed to capture revenue from the 155 "rich" people who would otherwise exploit loopholes to escape income taxes.
Swatting at a gnat with a baseball bat, they swung and missed.
A 2001 study of the AMT by the Joint Economic Committee said that in 1967 there were 71.7 million U.S. taxpayers. The 155 "rich" who owed no income taxes that year equaled about 0.00022 percent of all taxpayers.
The real purpose of the new tax was not to capture revenue from the wealthy class, but votes for the governing class. "Although the minimum tax was small potatoes in terms of the revenue it yielded," said the Joint Economic Committee, "it was a hot potato politically; in 1969, more people had written to Congress to complain about the 155 people who paid no income tax than had written about the Vietnam War."
In any event, the tax did not achieve its stated purpose: In 1976, Treasury reported that 244 taxpayers who earned over $200,000 in 1974 had owed no income tax.
This sparked the first of multiple revisions (i.e., compounded complexities) in what became known as the Alternative Minimum Tax. In 1999, Congress voted to phase out the tax, but Clinton vetoed the bill. The tax survived.
Now it's swinging toward a target it can actually hit: the middle class.
In her latest annual report to Congress, IRS National Taxpayer Advocate Nina Olson called the AMT "a time bomb on a short fuse." She ranked it the No. 1 problem facing taxpayers.
"In 2005, it is projected that 65 percent of married couples with an adjusted gross income (AGI) between $75,000 and $100,000 with two or more children will be affected by the AMT -- up from one percent in 2003," wrote Olson, relying on analysis by the Urban-Brookings Tax Policy Center. ". . . In 2010, the AMT is projected to affect nearly 32 million taxpayers. The majority will have incomes under $100,000, and more than 36 percent of taxpayers with incomes between $50,000 and $75,000 will owe AMT."
Why will this tax on the "rich" hit the middle class? First, unlike the regular income tax, which President Reagan forced Congress to index for inflation, the AMT was never indexed. Secondly, the AMT disallows deductions that go to the core of middle-class life -- including those for dependent children and for state and local taxes.
Finally, Congress now factors into its budget projections -- which foresee huge deficits -- the revenue windfall from imposing the AMT on the middle class.
Joseph Barr was right about one thing. A middle-class tax revolt is coming. But it won't be against the rich. It will be against the tax on the "rich" Barr inspired. And this time, an IRS official is leading the charge. National Taxpayers Advocate Olson recommends that Congress repeal the AMT. Politicians who reject this recommendation may find voters rejecting them.
Thank you for shedding some light on the true rich. Nothing wrong with being rich but..
So many hear the Kennedy's, the Feinstein's, et al talk about the rich paying their fair share -- meaning themselves? Hardly.
This ought to be hammered and hammered in public forums in all media, IMO. They've gotten away with it for decades.
Please post this often where germane.
In other words nothing will be done because the same people complaining about outsourcing will complain about not getting free dental.
That may be all they’re worth in Mexico, Nicaragua or whatever backwards difficult land they live in. You should have a right to hire them, and they should have a right to work for whatever entices them out of the slums. In a few years as they strike and demand living wages, the pull of jobs will evaporate, and we’ll have new markets to sell to. Freedom and capitalism are beautiful, but difficult to understand!
The article doesn't only mention employer taxes. It mentions employee benefits---health insurance and retirement. How are we going to make those costs go away?
Employers currently don't have that option with taxes. Their only option to avoid these costs is to cut positions, offshore production, and curtail or shut down production in the US.
With the National Retail Sales Tax, products will be taxed at the final point of sale only, and that tax will be applied to products regardless of their country of origin. The cost of producing US products will be much closer to the cost of producing the same item overseas. The hidden costs of income tax, social security tax, and medicare tax will be removed from the cost of producing the US-made product.
The hidden costs of taxes in US products currently include the above taxation on income produced at every step of production, transportation, and sale. Foreign-made products evade these hidden costs until the finished product arrives on US soil.
The big question here is why any American citizen would oppose leveling the field (even a little) to reduce the unfair competition against American-produced goods.
I can imagine that the most out-spoken opponents of the NRST might be those who currently benefit from the existing arcane monstrosity of tax code, or those in government who demand ever increasing control of the daily activities of the peasants.
Are you certain about this? While it is true that employers have been increasing the employee share of insurance costs, I'd be rather surprised to learn that employees have been absorbing all, or even most, of the increases.
In case you haven't noticed, several CEOs of large public U.S. companies support federalized health insurance. Explain that one.
Federalized insurance would allow the companies to completely shift the cost (and administrative costs) to the employees, through taxation. That's not rocket science.
Companies currently shift their overhead costs to employees and customers, either through decreased wages, or through increased prices.
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