The Impact of Tax Reform, from a Manufacturer’s Perspective

Currently, the highest marginal federal corporate tax rate in the U.S. is 35 percent but often exceeds 40 percent once state taxes are incorporated. For capital intensive businesses such as manufacturers, opportunities for growth and expansion are often compromised to accommodate these high rates. While the proposed reduction of these rates could alleviate some of the burden on manufacturers, the ability to immediately expense capital investments could dramatically transform the U.S. business climate.

Under President Trump’s proposed plan, companies could instantly write off an investment as opposed to depreciating it over several years. This, in turn, would free up capital for further investment into the U.S. economy. The impact of additional manufacturing investments could be felt in more jobs and all the way through the supply chain.

In 2015, Clemens Food Group broke ground on a 650,000 s.f. fresh pork processing facility in Coldwater, Michigan, in response to growing demand for its products. Upon becoming operational later this year, the highly automated, state-of-the-art facility will double its fresh pork business.

As Doug Clemens, president and CEO of Clemens Food Group, explains in the video below, the company would have invested another $30 million two years ago to put in a second production line if immediate expensing were an option.

“As a 122-year-old privately held company, capital expenditures are extremely important to us,” he said. “We need to have as quick a return as possible.”

Although the timing and details of a new tax code are still being determined, the manufacturing impact is sure to be monumental.

For more information on the current and proposed tax system, read Corporate Tax Reform: What It Could Mean for the American Industrial Economy.