In it he suggests giving financial incentives for new and used car buyers, “tweaking” the previously approved $25 billion for car makers to allow earlier disbursal and requiring unions and management to restructure their contracts.
He also suggests cutting the manufacturing tax rate faster than the 2005 bill he co-authored would allow would provide the immediate infusion of money the Big 3 requires. If that were enacted, domestic manufacturers would have a 9% tax advantage over foreign manufacturers. He also favors reducing the corporate tax rate from 35% to 15%.
Manzullo Offers Plan to Strengthen U.S. Auto Industry, American Economy
[WASHINGTON] Congressman Don Manzullo (R-IL) today told the CEOs of the Big 3 Automakers that they must look beyond their short-term needs and employ programs to increase the demand for their vehicles if they expect to survive the next several years.
A member of the House Financial Services Committee, Manzullo participated in this morning’s committee hearing on a potential bailout of GM, Ford and Chrysler. Manzullo challenged the CEOs of each of the companies during the hearing, seeking their thoughts on the value of offering tax incentives to encourage Americans to buy vehicles. Manzullo’s opening statement can be viewed on his website at http://manzullo.house.gov.
But simply giving the automakers money to stem the bleeding will do nothing to protect their jobs in the future,” Manzullo said. “Auto sales are down 30 to 50 percent for each of the companies, and we must consider offering tax credits or other incentives to encourage Americans to buy cars again.”
Manzullo supports a 3-step approach to strengthening the U.S. auto industry and improving our economy:
- Allow automakers to stem the bleeding by tapping some of the previously approved $25 billion in loans for retooling plants to meet higher fuel economy standards. This is the fastest way to get cash to automakers because it is a bipartisan solution supported by the President and does not require a taxpayer bailout. With a legislative tweak, the automakers could quickly get the cash they need and then pay it back to the retooling fund at a later date.
- Require management and unions to follow through on plans to restructure and make Big 3 American companies more cost competitive. This restructuring will be necessary to ensure American companies can compete in the future with foreign vehicles built in America.
- Provide incentives to encourage Americans to start buying cars again. Manzullo co-sponsored a bill – HR 7273 – that would allow Americans an income tax deduction on the sales tax and interest they pay on a new car. This would provide a $1,300 tax benefit on the purchase of a new $25,000 car. He is also considering a straight tax credit on the purchase of a new or used vehicle (if we offer a tax incentive to promote new car sales, we must also offer a tax incentive – albeit smaller – for used cars or the dealerships will be flooded with unsellable used cars).
Manzullo also believes accelerating the domestic manufacturing tax deduction – which he co-authored in 2004 – would dramatically reduce taxes on the Big 3 American automakers and give them the cash infusion they need to sustain and create new jobs. The manufacturing deduction currently provides a 6 percent tax rate reduction for manufacturers on the goods they produce in the United States.
The tax rate reduction is scheduled to increase to 9 percent by 2010, but a bill Manzullo authored earlier this year (HR 5101) would accelerate the phase-in to 9 percent retroactively to Jan. 1, 2008.
“This legislation gives our manufacturers an extra 3 percent cut in their tax rate immediately that they can use to sustain and create jobs in America,” Manzullo said.
“It also provides a greater incentive for our manufacturers to keep jobs in the United States and actually bring some jobs back from overseas because they would pay a 9 percent tax premium on any work they send offshore.”
Manzullo supports several other free-market strategies to help American automakers, including:
- Allowing companies to repatriate their overseas profits back to the United States tax free for one year if the money is used to pay off distressed debt or support business expansion or job creation.
- Suspending the capital gains and “recapture taxes” for two years to encourage Americans to invest in America and encourage corporations to sell unwanted assets and acquire the capital they need to sustain and create jobs.
- Allowing companies to carry-back losses an additional two years, generating a tax refund and immediate capital.
- Directing the Securities and Exchange Commission to suspend the mark-to-market regulatory rules until the agency can issue new guidelines that will allow firms to mark these assets to their true economic value.
- Reducing the corporate tax rate from 35 to 15 percent.
- Ensuring unusually high pension funding requirements do not destroy America’s automakers in these troubled economic times.