Here’s one thing everyone can agree on: Federal regulatory and international tax policy implications can be as exciting as, well, watching paint dry.
But for job creators – like America’s paint and coatings industry, which contributes $22 billion each year in economic activity – costly, burdensome and unnecessary regulations are hurting employers and making it even more challenging to make things here and hire more hardworking men and women who are seeking rewarding opportunities. At a high level, leaders in Washington from across the political spectrum support American manufacturing, and the countless families and entire communities that depend on this thriving industry for their livelihoods. And as President Obama has said, domestic manufacturing supports the “quintessential middle-class job.”
Indeed, America’s paint and coatings manufacturers play an important role in creating and driving middle-class job growth. Supporting more than a quarter-million jobs nationwide, with nearly $12 billion in payroll, America’s paint and coatings manufacturers are a modern, advanced industry that produces essential products that better everyday life.
Yet one of Washington’s latest regulatory schemes is just another blunt, destructive policy that will handcuff America from achieving its full manufacturing potential. Commonly referred to as Section 385, this latest, poorly considered regulatory overreach represents yet another step backward that will only cause pain for domestic manufacturers and the thousands of small businesses across the industry’s supply chain. With Treasury’s newly proposed Section 385 regulations, the administration is attempting to curb the practice of corporate “inversions” – relocating to a lower-tax nation. Instead, however, Washington bureaucrats have crafted a scheme that will create costly and burdensome regulatory requirements for domestic job creators who have no intention of inverting.
To be absolutely crystal clear, no one is arguing in favor of sidestepping U.S. tax obligations, but Treasury’s proposal is so overly broad that it will have an unprecedented and chilling effect on how businesses, large and small, effectively and efficiently manage cash flow across their operations.
Section 385 is a complex regulation with far-reaching unintended consequences. Our members – as well as the business community across the country representing millions of American workers – are deeply concerned about the proposal’s impacts on long-standing, common-sense cash management practices. For example, many companies utilize cash pooling to best manage their resources. This practice enables a company to pull its resources together into a central location and distribute resources where they are most needed. In short, it’s a highly effective and commonly used practice for businesses to manage resources. Despite the fact that cash pooling is a long-established and widely used approach for day-to-day cash management, Section 385 would eliminate this practice, making it even more challenging for businesses to effectively operate and ultimately grow and hire more workers.
This proposal would also directly make the U.S. less attractive for foreign companies to invest here and create jobs. And with foreign direct investment supporting more than 12 million American jobs, according to Commerce Department data, Section 385 would have a costly impact on countless American families.
Finally, and perhaps most troubling, Section 385 would strap domestic businesses with layer upon layer of additional red tape that will increase compliance costs and harm – not help – job growth. How so? According to a recent PricewaterhouseCoopers report, the proposed Section 385 regulation “will impose substantial compliance costs” on U.S.-based job creators and cause a “large reduction” in the ability of domestic employers to compete globally.
At a time when America’s economic growth is moving too slowly and uncertainly for too many job-seekers, and with manufacturers slowly clawing back from the Great Recession’s depths, it makes no sense for Washington to enact policies that risks harming job creators here at home. Put simply, Section 385 is a blunt object of a regulation that will upend standard business practices and threatens to harm American job growth and economic competitiveness in the global marketplace where we’re already losing ground, especially given our nation’s outdated and punishing tax code.
Rather than churn out pages and pages of new regulatory red tape that punishes job creators, leaders in Washington should come together and work toward overhauling our uncompetitive tax regime with a focus on putting the American worker and job creators in a position to effectively compete and win globally. If Treasury’s attempt to limit inversions tell us anything, it’s that America’s corporate tax code must be modernized to encourage job growth and meet the 21st century’s global challenges.