Study highlights threat to manufacturing jobs without tax reform extension

Failure to extend 2017 tax reforms could cost the U.S. economy 6 million jobs and $1 trillion, with manufacturing facing significant losses.
EDITED BY LUKE REYNOLDS
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The U.S. economy could lose nearly 6 million jobs and face a $1 trillion economic shortfall if pro-manufacturing tax policies from the 2017 Tax Cuts and Jobs Act are not extended, according to a new EY study released by the National Association of Manufacturers. The study underscores the critical role tax policies play in supporting American manufacturing and the broader economy. 

“The time to act is now. Millions of American workers are depending on the manufacturing sector to continue driving America forward,” said NAM President and CEO Jay Timmons. “Pro-growth tax policies from President Trump’s 2017 tax reforms were rocket fuel for manufacturers and made the U.S. economy more competitive on a global scale. Manufacturers kept our promises to create jobs, raise wages and benefits, and invest in our community.” 

Key findings of the study include projections of 5.9 million lost jobs, a $540 billion reduction in employee compensation, and a $1.1 trillion drop in U.S. GDP. The manufacturing sector, in particular, would bear significant losses, including more than 1 million jobs, $126 billion in worker compensation, and a $284 billion reduction in GDP. 

Impact on manufacturing 

Manufacturing leaders stressed the need for immediate congressional action to avoid these economic consequences. 

“Maintaining competitive tax policy is essential to sustaining this momentum, enabling manufacturers to invest in cutting-edge technologies, expand operations and provide good-paying jobs,” said Kathy Wengel, Johnson & Johnson executive vice president and NAM board chair. 

The 2017 tax reforms spurred significant growth in manufacturing, with capital spending increasing 4.5% and 5.7% in 2018 and 2019, respectively, following meager growth of 1.4% in 2017. The sector also saw its best year for job creation in 21 years in 2018, adding 267,000 jobs. However, the expiration of key provisions, such as immediate R&D expensing and full capital equipment expensing, has already slowed growth, with R&D growth in the European Union surpassing the U.S. for the first time in nearly a decade. 

“Trump’s tax reform allowed Americans to keep more of their hard-earned money and enabled businesses to invest in their ideas, products, and people,” said Senate Finance Committee Chairman Mike Crapo, R-Idaho. “Making these tax cuts permanent is the best way to ensure the greatest economic growth, provide certainty and stability for American businesses, and avoid the economic losses described in this study.” 

A call to action 

Congressional leaders emphasized the urgency of extending the tax reforms to prevent the largest tax increase in U.S. history. 

“With nearly 6 million jobs on the line, Congress must act swiftly to give American small businesses, families, and communities the green light to hire more workers and expand their businesses,” said House Ways and Means Committee Chairman Jason Smith, R-Missouri. 

House Speaker Mike Johnson, R-Lousiana added, “It is the responsibility of Congress to act quickly so we can protect Americans’ livelihoods, prevent wage decreases, and avoid the largest tax hike in history. House Republicans are working hard to preserve and build on President Trump’s historic tax reform and support America’s manufacturers.” 

Supporting small manufacturers 

Small manufacturers are especially vulnerable to tax increases, according to Ketchie President and Owner Courtney Silver, outgoing chair of NAM’s Small and Medium Manufacturers Group. 

“We’re already struggling thanks to the expiration of immediate R&D expensing, full expensing for capital equipment purchases, and interest deductibility for job-creating projects,” Silver said. “Congress should reverse these expirations and prevent even more devastating changes to the pass-through deduction, the estate tax, and more from taking effect next year.” 

The path forward 

Manufacturers are urging Congress to act quickly to restore tax provisions and ensure long-term economic growth. As Jay Timmons noted, “This data—6 million American jobs at stake—makes crystal clear that preserving tax reform should be one of the first acts of the new Congress and the new administration.” 

To view the full EY study, including state and district impacts, click here. 

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