One of the issues President Obama emphasized in his State of
the Union address was bringing manufacturing jobs home and incentivizing clean energy-related manufacturing.
He wants to close loopholes that reward companies for moving
overseas and create incentives for them to come back to the US.
He also uses these tax changes to eliminate oil industry subsidies (see #3), which would also help the clean energy industry.
"We’ve subsidized oil companies for a century," Obama
said. "That’s long enough. It’s time to end the taxpayer giveaways to an industry that rarely has been more profitable, and double down on a clean energy industry that never has been more promising. Pass clean energy tax credits."
The White House released a six point tax plan and is pressuring Congress to enact them immediately.
The plan will be included in the 2013 budget, which will be released February 13:
1. Provide $5 billion in new clean energy manufacturing tax credits.
2. Remove tax deductions for moving costs associated with relocating abroad. Use the money saved from this change to give a 20% income tax credit for expenses associated with moving operations back to the US.
3. Reform the current deduction for domestic production by focusing it solely on manufacturing – it would no longer cover oil production. Those savings would be invested in expanding the deduction for manufacturers who create jobs in the US and double it for "advanced manufacturing."
4. Provide $6 billion in credits ($2 billion a year for three years) to help finance projects in communities that face major job losses. The tax credit would support qualified investments to escape the death "spiral" when jobs are off-shored.
5. Allow companies to expense 100% of investments in plants and equipment, which would cost $4 billion in revenue.
6. Close a loophole that allows companies to shift profits overseas from "intangible property" such as patent royalties that were created in the US. This would raise $23 billion in tax revenue.
Taken together, the six changes would not add to the deficit, says Gene Sperling, White House National Economic Council Director.
Sperling says these changes could convince some manufacturers to "think twice" before taking jobs abroad, noting that manufacturing is key to the development of intellectual property and spawns 90% of patents.
Over the coming weeks, the White House will release a plan for corporate tax reform. It will include an International Minimum Tax, which would tax US corporations on overseas profits.
The Clean Energy tax break extends the Advanced
Energy Manufacturing Tax Credit, which awarded $2.3 billion in tax credits for 183 projects as part of the Stimulus Bill (Recovery Act). Obama wants to extend this popular, over-subscribed program by extending the tax credit and providing an additional $5 billion, which, the White House says, would drive nearly $20 billion in domestic clean energy manufacturing over the next decade.
The 30% tax credit, which also leverages private capital, is used to help manufacturers of clean energy-oriented products expand or develop new products.
Obama tried to extend and strengthen the tax credit in last year’s budget, but the GOP blocked it.
Qualifying manufacturers produce renewable energy equipment, batteries, electric cars, electric grids to support transmission of renewable energy; energy conservation technologies; and equipment that captures and sequesters carbon dioxide or
reduces greenhouse gas emissions.
More details on the White House plan:
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