The National Association of Manufacturers (NAM) held its semiannual board of directors meeting in Washington, D.C., on September 28 and 29. The meeting included appearances from Treasury Secretary Steve Mnuchin, Senate Majority Leader Mitch McConnell and President Donald Trump.
Mnuchin kicked off the meetings at the board’s breakfast session Thursday morning. During a discussion moderated by NAM President and Chief Executive Officer Jay Timmons, Mnuchin reiterated that tax reform is a top agenda item for the administration. He discussed the basics of the president’s reform initiative. The details of the president’s plan weren’t discussed in depth, but Mnuchin said they’re working toward rate reductions that would adjust the corporate tax rate ceiling to 20 percent. The tax ceiling for business income for flow-through entities would be adjusted to 25 percent. He also indicated there would be ongoing negotiations on how to define business income versus wage income earned by owners of flow-through businesses.
McConnell spoke to the board Thursday afternoon. He addressed the public scrutiny the Senate has received for its inability to pass legislation. He discussed the process of passing items and stated the Senate has a significant agenda it’s working on, including confirming Trump appointments and negotiating various legislation. He indicated he still has hopes for health care reform and believes it’s important to pass tax reform. He said he believes dramatic reductions in tax rates are needed. He also said there are significant differences of opinion between party lines on how to do this.
Friday morning, Trump spoke to the board. The main focus of his speech was on the need for tax reform. During his speech, Trump got very specific on certain elements of his tax reform agenda. He said his plan includes significant rate reductions, simplification of the existing tax code structure and the elimination of certain elements of the code. Specific items included:
- Reducing the number of existing tax code brackets for individuals to three
- Lowering existing tax rates for individuals to brackets of 12, 25 and 35 percent; however, he did indicate he was leaving open for discussion the possibility of an additional higher bracket for higher-income earners.
- Lowering existing corporate tax rates to a ceiling of 20 percent, with a provision for flow-through business income to be taxed at 25 percent
- Eliminating the alternative minimum tax (AMT)
- Eliminating the estate tax, also known as the “death tax”
- Creating immediate expensing of capital expenditures
Trump expressed his concern that the U.S. is the world’s most highly taxed developed country. He said it was important to lower income taxes to balance the competitive landscape with our foreign competitors. He also said simplifying tax filing requirements would save significant tax preparation fees for taxpayers.
Trump has pushed to repeal the AMT, as he said it’s not fair to require certain individuals to compute their income taxes using two methods and then have to pay the higher of the two. Regarding the estate tax, Trump said it’s unfair that remaining family members are often faced with the potential of having to sell their businesses to pay the resulting estate taxes when an owner dies.
In closing, Trump commended NAM for its actions and praised the thousands of employees across the country who work on the front lines in manufacturing.
While much of the board meeting revolved around the guest speakers, the economic data and outlook of the members continues to be higher than it has in years. NAM Chief Economist Chad Moutray presented various data points that demonstrate the economy is advancing favorably. Key elements include:
- The most recent quarter’s gross domestic product (GDP) was upgraded to 3.1 percent, which is the highest growth quarter in several years
- The Federal Reserve now estimates real GDP growth for 2017 (year-to-date) to be 2.4 percent
- Unemployment is expected to decline to 4.3 percent
- Manufacturer sentiment is at its highest point in several years, with approximately 90 percent of manufacturers indicating they have a positive outlook on the future growth of their businesses in the most recent NAM survey
In summary, there’s a positive outlook on business activities, and Congress will play a significant part in the future of tax reform. Stay tuned for more insights as reform legislation works its way through the House of Representatives and Senate.