This five-part series by the Council on Competitiveness calls for a new era of production excellence in America. Check back throughout the week for more strategies for American manufacturing excellence.
Part 1: Innovation (you are here)
The Council on Competitiveness’s Make: An American Manufacturing report issues a call to the American people to keep manufacturing a cornerstone of American independence, economic prosperity, and national security. This series was recently presented to the government as a non-partisan strategy to resolve issues facing American manufacturing, which remains a driver of innovation and job creation, even as automation and technology make manufacturing more efficient. A new era of manufacturing excellence offers hope for good jobs, new innovations, and a higher standard of living. America would benefit from faster economic growth, a more secure industrial and defense base, and an ability to produce solutions to national challenges in energy, health, environment, and the economy.
Americans have lost production of cutting-edge innovations developed in America because of tax, regulatory, skill, finance, and infrastructure limitations that make production elsewhere more competitive. Americans have always been pioneers, risk-takers, and makers. The Council’s task is to set those impulses free and embrace production. Americans have proven adept at rising to the economic challenge of their time. Such a time is now for manufacturing—and Americans can set in place the policies to ignite a new era of competitive and sustainable manufacturing.
CHALLENGE: Fueling the innovation and production economy from start-up to scale-up.
SOLUTION: Enact fiscal reform, transform tax laws, reduce regulatory and other structural costs, and create jobs.
Recommendation: Congress should permanently replace the current world-wide double taxation system with a territorial tax system to facilitate the repatriation of earnings and restructure the corporate tax code to increase investment, stimulate production at scale, and neutralize sovereign tax incentive investment packages.
- Reduce taxes on repatriated earnings to less than 5 percent in line with other Organization of Economic Co-operation and Economic Development (OECD) economies to stimulate long-term investment in new U.S.-based manufacturing facilities, modernize existing facilities, and purchase manufacturing equipment.
Recommendation: Congress should restructure the corporate tax code to increase investment, stimulate production at scale, and neutralize sovereign tax incentive investment packages.
- Enact a statutory corporate tax rate of 22 percent; in-line with the upper quartile of other OECD economies.
- Make permanent the R&D tax credit, increase it from 12 to 15 percent and include applied research related to U.S. manufacturing.
- Allow 100 percent expensing for manufacturing plant, property, and equipment; and institutionalize accelerated depreciation treatment for all capital investments.
- Make the capital gains tax rate permanent at 15 percent to reduce the cost of capital and incent investment in new businesses.
Recommendation: Congress should require agencies to begin reducing the costs and burdens of current and proposed regulations.
- Codify into law guidance for the development, review, and transparency of federal regulations. Require federal regulatory agencies to assess and reduce unnecessary complexity, time, and costs.
- Require regulatory agencies to seek approval from congress for exceeding set maximum thresholds for compliance costs. Doing so would improve transparency and make federal government officials more accountable for the costs of major new regulations.
- Require by law a second agency review of the economic impact assessments for significant rules (exceeding $100 million in compliance costs) to be facilitated by the Office of Information and Regulatory Affairs (OIRA).
Recommendation: Congress should immediately reform section 404 of the Sarbanes-Oxley Act to increase entrepreneurs’ access to U.S. public capital markets and grow new companies.
- Allow public companies with market valuations below $500 million to opt out of regulations within section 404 of Sarbanes-Oxley for the first ten years after going public.
Recommendation: Congress should reduce the costs of tort litigation from the current level of almost two percent of GDP—some $248 billion—down to one percent by 2020.
- Revise U.S. liability laws to balance the needs of offering protections, encouraging the development of new technologies.
- Enact class-action reform that would eliminate treble damages and frivolous law-suits.
Recommendation: Congress and the administration must take action on fiscal reform to achieve $4 trillion in debt reductions by 2021.
- Reduce discretionary spending and restructure tax and entitlement programs—Social Security, Medicare, and Medicaid—while continuing to make high-priority strategic investments in talent, R&D, and infrastructure.
