Morris Beschloss: The death tax: A small-business killer?
While the so-called “death tax” has been proven increasingly unpopular as conservatives have gained increasing political power in the House and Senate, it has been negligible in adding to federal tax collections, as the U.S. debt has continued to set new records to more than $20 trillion in early 2018.
In fact it has reached an all-time low as a percentage of total tax collections, as independent businesses have rushed to sell out as a means of assuring the owners’ recipients give up their holdings to larger corporations so as not to be saddled as potential tax victims.
This trend was sped up during the outbreak of leveraged buyouts in the 1980s and the subsequent financial disinflation (2008-12), as privately-owned businesses feared a repeat of the financial crisis. Added to that was the monetary power of conglomerates that went after manufacturers, distributors and end users in the PHCP industry, for instance.
This has led to a massive conglomerate sector tending to move its manufacturing capabilities to the cheapest cost areas whose quality passed muster in the minimum American standard levels.
This has currently led to the Trump administration’s strong efforts to eliminate the death tax by dwelling on the all-time-high consumption percentage (68%) as a component of the USA’s world-leading gross domestic product.
The year 2018 may well become the period to determine whether the independent businesses will retract their direction and make it again desirable to keep ownership within the family. The current year is particularly significant as the Nov. 6 midterm elections will determine the strength or weakening of the Trump administration’s economic policies.
A continued digression of ownership by conglomerates at all levels of manufacturing, distribution and/or end-use may well lay the longtime groundwork of the PHCP industry and similar businesses in the future.
A further shift to conglomeration will most assuredly transfer most American business sectors away from private ownership, making the value of dividends and their quarterly reporting results the ultimate judgment value. This will determine the future of much of the historical American business direction, indicating whether personal or family ownership will be the ultimate structure of most businesses; rather than the current shift to future corporate investment ownership.
Is the U.S. steel industry becoming dependent on Russia?
When President Trump laid out his significant objectives shortly after his Jan. 20, 2017 inauguration, he signed a number of executive orders to ignite a reversal of America’s increasing dependence on overseas manufacturers, especially those products that would put American blue-collar workers back on the assembly lines.
Chief among these was the revival of the U.S. steel industry that had lost its global superiority several decades ago. Much of the emanating products would be the badly-needed steel pipelines, which had languished in the backlog of a nonexistent infrastructure, waiting to be bigger and better than ever after a hiatus of more than a quarter-century or more.
Unfortunately, this promise has yet to gain reality as more than half must come from a major Russian steel company and a mix of other foreign sources. By the end of 2017 this promise had remained unfulfilled as has an embryonic revival of a U.S. steel industry that provided the backbone of America’s Marshall Plan to rebuild the Western world that was destroyed in World War II.
Ironically, within the current Russian-American involvement investigation, much of current U.S. steel demands continue to be supplied by cheap foreign steel, with imports rising 24% in 2017, the greatest expansion since the end of the 20th century. The largest single supplier of U.S. steel imports is Evraz PLC, Russia’s second-largest steel maker. That company has two factories in the U.S., in Colorado and Oregon, and four in Western Canada. The latter is especially deeply involved in producing steel and large domestic steel pipe.
Furthermore, Evraz won a major contract with America’s largest liquified natural gas company, Cheniere Energy, to supply the steel pipe for a 200-mile pipeline to bring natural gas from Oklahoma to the Gulf Coast conversion facilities and ports. To the administration’s embarrassment, the resultant major U.S. partially-owned Florida-based company, Borg Steel Pipe Corp., the U.S. producer, was not able to come close to Evraz in bidding for the $100 million contract.
This past September, Commerce Secretary Wilbur Ross said the administration will defer a decision to impose tariffs on foreign steel so that it could focus full attention on tax reform. This has upset American steel executives who are verbalizing their growing frustration with U.S. administration promises while planning domestic expansion as promised by the same administration.
Further digression from American steel product usage could prove counterproductive to thousands of steelworkers whose votes were instrumental in electing President Trump in a half-dozen steel-producing states. The inability to fulfill a substantial steel industry comeback promise in the months ahead could instigate negative political action in states that elected Trump.
Will 2018 begin to gather production steam?
While still early in the year, President Trump’s promised return of U. S.-based manufacturing seems to have found a solid beginning.
The key to the current U.S.-based manufacturing reversal is the development of greater cost effectiveness that has immeasurably shrunk the benefits of outsourcing of late. This previous unavailability, now provided by technological production methods, has reduced the number of employees needed to consummate manufactured finished goods.
This availability, requiring less employees in the “in-between steps,” has greatly added to cost lowering and the quality of many products that had been transferred overseas since the first of this century.
This advantage of U.S. technology and manufacturing ingenuity has allowed today’s manufacturing assembly lines to become more effective; reversing imports, to “home base,” and even exports in the growing numbers of manufacturing opportunities.
Although the many technological components that make “Made in the USA” more desirable are still in the developmental stages, these are geared to greatly broadening the finished products and distributing them in the U.S.
Lower labor costs promise opportunities in many manufacturing categories that conglomerates had transferred overseas in the last few decades. Also, the new factories housing the technological developments of the recent past are themselves restructured to be more cost-effective by virtue of up-to-date technology.
The greatest holdup in accelerating this upgrading in the shortest possible time period relates to the shortage of skilled labor to perform the new positions, making such upgrading universal. The time gap of bringing such advanced technology into voluminous utilization may take more or less time depending on the services with which such programs are pushed by the federal government and major business-sector levels. This responsibility will fall on the White House and a supportive Congress to intensify the time urgency to more quickly give American manufacturers the benefit.
A successful outcome within the next year could make the difference between a time-consuming level and the roaring success of a domestic manufacturing return that would be possible in the most successful cases.
To be realistic, this success likely will take place in the next few years. But in combination with helpful tax benefits, the acceptability of such changes by the end of this decade could tip the scales in favor of a cost-effective and accelerated “new” U.S. manufacturing success.