If whatever breaks Carrier received also apply to other AC manufacturers,then,yes,it’s good economics. Otherwise it is the very definition of cronyism.
The word is out today that Trump didn’t offer them a special deal to keep them in the country. He merely mentioned that he was going to cut corporate taxes and burdensome regulations for everyone and asked them to reconsider.
I do not consider the Carrier deal cronyism at all. Is the owner of Carrier a friend of Trump’s and getting a special deal because he’s a friend of Trump’s? I don’t think so. Isn’t that what cronyism is? When one company, because of who they know, gets special consideration and breaks over the other companies?
The way I see it is this.....
Trump has plans to lower all taxes and rid the country of burdensome regulations so that MANY, MANY businesses will come back to and/or remain in the U.S. Naturally, he has not had the chance to implement any of these changes yet. Seeing as Carrier (and possibly others) are on their way out the door, he has jumped in to negotiate a deal to make them stay. If the changes he proposed for ALL businesses had taken effect several years ago, it’s highly unlikely they’d be leaving in the first place. These few companies who are dealt with individually because they were on their way out and drastic measures had to be taken to get them to stay are exceptions, not the rule. I suspect all he’s done is given them the same lower taxes and less regulation that everyone will see.
This is just smart business on behalf of the country, the company and, most of all, the employees. It’s not Trump rewarding someone because he’s a friend, or because he can cause Trump to personally gain. That’s cronyism.
Fwiw, there is a way to use the corporate income tax to avoid a tarrif. simply provide that the lower tax rates do not apply to income from foreign source products.
If the same deal offered to Carrier is offered to all manufacturers, then it is not crony capitalism. If it isn’t, then it is crony capitalism. Period.
4 later
Your math is a bit oversimplistic. Corporate tax is applied to profit not gross sales. Using your sale price and assuming a 50% profit margin gives a before-tax profit of $2000. With $800 in labor costs this implies $1200
in non-labor costs. A pre-tax profit of $2000 with a rate of 20% implies a $1600 after tax profit. That would be reduced to $1300 if the rate remains 35%.
In Mexico, assuming the same non-labor costs and a 20% tariff, the pre-tax profit is $4000 - $1200 - $800 - $142 = $1858. Assuming Carrier qualifies as a resident corporation after moving, a 22% tax rate applies giving an after-tax profit of $1449.24 per unit sold.
Obviously, for remaining in Indiana to make economic sense, the US corporate rate would need to be cut, something Trump has promised but it isn’t a certainty. Carrier is betting on Trump to succeed in this regard.
Another point where the “math” of the left makes no sense is their squealing after this was announced that Carrier was bribed to stay by the $7 million in tax breaks it got. Using your values for average labor costs and ignoring other factors, this falls flat on its fave. The difference in average wages is $23 per hour. Multiplying by 40 hrs per week and 52 weeks per year gives a savings of $47,840 per employee per year. With 1,100 employees that’s $52,624,000 per year in potential savings by moving to Mexico. Why would carrier give that up for a one-time tax break that is valued at less than 1/7 of its yearly savings in labor costs?
Back when this all came out that Carrier told their employees SOL, I found out that it was new regulations that was the final nail. I’m sure Trump addressed that issue also, and I hope he follows through with his deregulation plan as well as lowering taxes.
Shipping or transportation involved?
This deal was on the table and rejected by Carrier last March. The Donald sweetened it by promising a better business environment across the board in the USA. Now many Carrier employees will share a merrier Christmas with their loved ones.
bookmark
They ignore all the “green” companies which went belly up after receiving $million$ in federal funds.
Now, that was “crony capitalism”, which isn’t captitalism at all.
Why isn’t Obama being criticized by the leftist media for these demonstrated examples of fake-capitalism?