Trump talks $7M tax break at Carrier; Purdue prof. says maybe not so good for taxpayers

AP Photo
AP Photo

INDIANAPOLIS — The state of Indiana is offering Carrier a $7 million tax break over 10 years, and President-elect Donald Trump says he’s working on more incentives for companies nationwide.

Trump and Vice President-elect Mike Pence were at the Indianapolis Carrier Plant Thursday afternoon to celebrate their deal with Carrier.

RELATED: President-elect Trump’s deal saves some, but not all, Carrier jobs

Chuck Jones, the union local president, says some 800 production and supervisor jobs will be saved, while the remainder are headquarters and engineering staff that were not going to be outsourced. Trump didn’t say anything about the hundreds of jobs that will still be lost from the plant. The Washington Post reports at least 400 jobs will still be lost. Other reports given higher estimates.

Carrier had announced in February it would send 1,400 hundred jobs to Mexico. But Trump used Carrier as an example in his campaign, saying he would tax anyone who moved jobs to Mexico. He still says he’s going to do that, but now he’s offering specific incentives to stay.

Trump says he plans to lower the business tax from 35 to 15 percent and focus on changing regulations. He says since about six years ago, 260 new federal regulations have passed – 53 of which affect the Carrier plant.

RELATED: As Trump claims to have saved Carrier jobs, details are hazy

Trump called those federal regulations massively expensive. “Probably none of them amount to anything in terms of safety or the things you’d have regulations for,” he said.

Carrier workers in the room got excited when Trump said companies are not leaving the U.S. anymore without consequences. He explained those who choose to move jobs to Mexico will be taxed very heavily at a “very strong” U.S. border.

Edward Robinson, a Carrier worker, said he’s one of the employees that’s going to keep his job as a result of the deal. “If it’s going to help business stay here in Indiana, I’m all for it,” Robinson said. “And (stay) here in the United States, I’m all for it.”

Trump didn’t say anything about the company’s plant in Huntington, United Technologies Electronic Controls, which is moving 700 jobs to Mexico. UTEC employees said they feel forgotten by Trump.

Dr. Jillian Carr, assistant professor of economics at Purdue University Krannert School of Management, talked about the long-term financial effects for the state and local entities. She said the role of federal contracts raises many questions.

“Does this Carrier deal set a precedent? How does the government make a decision about when to intervene in such issues?” Dr. Carr asked. “Indiana is an obvious choice currently because Mike Pence is still the governor. In the future, though, will these interventions occur in places that have disproportionately more representation in the Electoral College or in swing states? The distributional effects of these targeted interventions could be large.”

Who pays for these incentives? Dr. Carr explains.

  • Indiana Taxpayers – If there are financial incentives from the state of Indiana, then those funds are going to come from Indiana taxpayers. This doesn’t necessarily mean increased tax rates, as program cuts can also generate the funds needed.
  • Consumers – The tax incentives in the U.S. are much less than Carrier expected to gain by moving the jobs to Mexico, so one of the other ways they could make up the difference is by increasing prices. In short, the products are likely to be more expensive.
  • Future workers – Broadly, the more pressure we put on manufacturers to keep production domestic, the more we incentivize the development of technology that can do manufacturing jobs. This in turn gives way to equipment that will ultimately reduce the number of humans needed to do a job.

Carr believes this could come at a cost to Indiana taxpayers, potentially losing government services.

She says threatening tariffs on companies moving jobs to Mexico could entice them to create technology that reduces the number of humans they need to employ. She points out that’s what could impact the future of manufacturing jobs in Lafayette.

 

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