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Raising the GILTI rate poses questions

You may have seen that some members of Congress are attempting to generate funds for infrastructure development by raising corporate tax rates. The West Virginia Manufacturers Association is no stranger to infrastructure development, but I want to emphasize that there are parts of this plan that will do more harm than good.

The effect of corporate tax fluctuations impact not only manufacturers and small businesses, but also job creation and economic activity. I’ve recently written about this: As West Virginia’s communities continue toward recovery from the COVID-19 pandemic, it is important that our legislators continue to consider tax reforms that encourage business growth and development to foster job creation and help workers navigate the post-pandemic landscape.

However, the proposal to raise the Global Intangible Low Income Tax (GILTI) rate from 10.5% to 21% is worrisome. GILTI is a tax designed to discourage multinational companies, mainly in the technology sector, from shifting profits on items like intellectual properties to other countries outside of the United States with lower tax rates.

While this tax increase will impact the industries that it intends to, it will also impact companies in other sectors — such as manufacturing — that employ millions of Americans who do not offshore jobs and assets.

West Virginia’s manufacturers and the communities they serve cannot afford to be beset by extra tax burdens. Our industry supports 50,000 jobs statewide and was strengthened by the 2017 tax reforms. In 2018, manufacturers added 263,000 new jobs, and wages increased by 3%. If the GILTI rate is increased and previous tax reforms are undone, this economic growth risks being lost. This is echoed by Jay Simmons, President and CEO of the National Association of Manufacturers, who stated “increasing tax burdens on American enterprise results in fewer jobs.”

GILTI has done what it was intended to do: keep American companies, jobs, and profits in the United States — we should not be trying to fix what isn’t broken.

Our industry has proven to be essential to recovery efforts in West Virginia and beyond. WVMA urges Congress to find other avenues to raise funds for infrastructure.

Rebecca McPhail

President, West Virginia Manufacturers Association

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