Failing to extend pro-manufacturing tax reforms from 2017 could devastate the US economy, costing nearly 6 million jobs and more than $1 trillion.
This is according to a study by Ernst & Young (EY) commissioned by the National Association of Manufacturers (NAM).
The manufacturing sector, in particular, is at risk, with significant job and revenue losses projected if Congress does not act by 2025.
NAM President and CEO Jay Timmons called for immediate action, saying:
“Millions of American workers are depending on the manufacturing sector to continue driving America forward.”
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The Impact of the 2017 Tax Reforms
The 2017 Tax Cuts and Jobs Act (TCJA) introduced several pro-growth policies that drove manufacturing expansion and bolstered the economy:
- Capital Investment Growth: Manufacturing capital spending grew by 4.5% in 2018 and 5.7% in 2019, compared to only 1.4% in 2017.
- Job Creation: Manufacturers added 267,000 jobs in 2018, the most in 21 years.
- Increased Competitiveness: The reforms made the US a more attractive place for investment and innovation.
These reforms enabled manufacturers to reinvest savings into their businesses by funding R&D, purchasing new equipment, expanding facilities, and creating jobs.
What’s at Stake Without Action?
The study predicts severe economic consequences if key tax policies are not preserved:
Nationwide Economic Impact
- 5.9 million jobs lost
- $540 billion reduction in employee compensation
- $1.1 trillion decline in GDP
Manufacturing Sector Impact
- 1.137 million jobs lost
- $126 billion reduction in manufacturing worker compensation
- $284 billion decline in manufacturing GDP
Research and development has already taken a hit. After the expiration of immediate R&D expensing in 2022, U.S. R&D growth fell behind the European Union for the first time in nearly a decade, with China’s growth tripling that of the US.
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Calls for Swift Congressional Action
Industry leaders and policymakers are urging Congress to extend the 2017 tax reforms to prevent further economic damage. Key provisions at risk include:
- The 20% pass-through deduction for small businesses.
- Competitive individual tax rates.
- The estate tax exemption threshold.
- Support for R&D and capital equipment investments.
NAM Board Chair Kathy Wengel highlighted the importance of maintaining these policies, saying:
“Competitive tax policy is essential to sustaining momentum, enabling manufacturers to expand operations and provide good-paying jobs.”
House Speaker Mike Johnson (R-LA) underscored the urgency, warning that failing to act could result in “an estimated 6 million lost jobs and devastation to America’s manufacturing sector.”
He urged Congress to prevent the largest tax hike in US history, citing the importance of supporting domestic manufacturing.
Why Immediate Action Matters
The research says prolonging uncertainty could stifle investment and job creation.
In 2017, delays in passing the TCJA meant manufacturers’ investment decisions were postponed, with benefits materializing only in 2018.
Manufacturing leaders emphasize that similar delays now would exacerbate the economic strain.
Small manufacturers are especially vulnerable. Courtney Silver, President of Ketchie and outgoing chair of NAM’s Small and Medium Manufacturers Group, said:
“We’re already struggling due to the expiration of immediate R&D expensing, capital equipment purchase deductions, and interest deductibility for job-creating projects.”
She called on Congress to reverse these changes and prevent additional tax burdens.
The Road Ahead for Congress
With the economy already backsliding, swift action to extend the 2017 tax reforms is critical. By preserving pro-growth policies, Congress can protect millions of jobs, foster innovation, and maintain the strength of American manufacturing.
Ensuring tax certainty will enable manufacturers to plan for long-term projects that drive economic growth and benefit workers across the country.
The stakes are clear: when manufacturing thrives, so does the US economy.