The Silent Debate
Trade deficits and how much the government will wring out of businesses rank somewhere back in the lukewarm-simmer area of hot-button election issues. Politicos will tell you that a crowd won’t go into a frenzy about tariff rates or excise taxes.
Except, maybe, with the stone trade. With the overwhelming majority of material, machinery and tools for the industry coming into this country from elsewhere, the direction of foreign trade remains a very big deal. And with both candidates proposing a satchel full of government programs, business will likely pay most of the freight.
These discussions aren’t even at the forefront of this year’s candidate platforms (or plans or contracts or covenants or whatever sounds less political). Since nobody else seems to care, I took an afternoon to hunt through a number of documents studies.
If you want to read the most about trade, Obama/Biden is the hot ticket. But, as you can guess, there’s a lot more of the politic than the practical.
The largest planks on trade with Obama deal with job outsourcing to foreign countries. Those companies that send jobs overseas shouldn’t get tax breaks (or deductions, to be precise). Companies backing the idea of keeping jobs here should get public contracts and tax credits. (More on that later.). Programs to retrain workers facing job dislocation should be expanded to service industries.
Fair trade in the Obama book, essentially, also opens up foreign markets to support U.S. workers. There’s a stated opposition to the Central American Free Trade Agreement, and the North American Free Trade Agreement should be renegotiated “so it works for American workers.”
All interesting points, but they also show little affect on the stone trade. Perhaps the only section of the Obama platform that may have an impact is a stated goal to use trade agreements “to spread good labor and environmental standards throughout the world.”
The McCain/Palin plank, by comparison, is succinct, but it’s not easy to nail down. Instead of any stated goals, it’s more of a handshake with the concept of the world economy.
For McCain, globalization is the way of the future with 95 percent of the world’s consumers outside our borders, and “we need to be at the table when the rules for access to those markets are written.
“To do so,” the statement continues, “the U.S. should engage in multilateral, regional and bilateral efforts to reduce barriers to trade, level the global playing field, and build effective enforcement of global trading rules.”
And that’s it. Basically, it’s more of the same policy we’ve seen in 2000s, and you’re the judge of whether it’s helped or hurt your business.
As far as corporate taxes, McCain’s plan is also short: Cut the rate from 35 percent to 25 percent. But, upon further review by the Washington-based Center for Tax Policy, don’t anticipate getting that cut all at once.
The current corporate federal-tax structure is based on four percentage marks: 35 (the highest), 34 (yes, the second-highest is one-percent less), 25 and 14. The McCain plan would eliminate the 35-percent level (and some associated surtax rates) right away, but the 34-percent rate would remain until 2010, when it drops to 30 percent. After that, the rate would drop by two percent every two years, and finally settle at 25 percent in 2015.
McCain’s plan, incidentally, also tinkers with capital-equipment depreciation rates, allowing for a full deduction in one year – but only for equipment that would depreciate in three or five years, and only between 2009-2013. (You also lose the ability to claim the interest deduction for that equipment.) After 2013, it’s back to the old depreciation schedules.
Obama stresses specific plans as far as individual tax rates, but his corporate-tax solution is a grab-bag. Some have no relation to the stone trade (such as eliminating loopholes on CEO-pay deductibility and enacting a windfall-profits tax on oil and gas concerns) and some have possible international impact, like a tax-haven watch list for countries not sharing tax-return data with the United States.
One proposal, as part of Obama’s trade plank, is a $3,000 tax credit for every job created by a U.S. business in 2009 and 2010. There’s also a current $250,000 provision for one-year equipment expensing by small businesses that the Obama plank would extend by another year.
One bit of semantics is the claim that Obama’s plan would raise taxes on small-business owners. Technically, that’s true – but that’s only those owners end up make more than $250,000 a year and declaring that as personal income (such as with sole proprietorships and some Subchapter S situations). It’s not the same as a corporate tax.
Maybe the debate moderators were right to steer clear of these, since the actual help/harm by either candidate remains, like a lot of things in this election year, fairly fuzzy. There really isn’t a specific edge when it comes to some important areas for the stone industry.
Don’t let that stop you, though, because this election isn’t all about business. However you make your decision, make sure to vote next Tuesday.