Epicor Software CEO Says Tax Reform Will Bolster U.S. Manufacturing
The Tax Cuts and Jobs Act, signed into law on Dec. 22, 2017 is good news for U.S. businesses and specifically for manufacturers, says Steve Murphy, CEO of Epicor Software Corporation.
Business software provider Epicor generates 80% of its revenues from North American manufacturers, distributors and retailers of manufactured products.
Manufacturing: In Dire Need of Tax Reform
The manufacturing industry generates trillions of dollars in economic output and employs millions of workers — more than any other industry sector.
In the past, manufacturers in the U.S. have struggled to compete under a tax system with high tax rates and arcane international tax rules.
2017 U.S. Corporate Tax Rates Were the Highest Among all Major Developed Economies
Prior to tax reform, the U.S.'s 35% statutory corporate tax rate was the highest among the 35 major developed economies that are part of the Organization for Economic Cooperation and Development.
Source: OECD
Reduced Corporate Tax Rates
The law lowers the corporate tax rate to a flat 21% — a 40% rate reduction.
Up until now, the high U.S. corporate tax rate has encouraged companies to manufacture overseas.
Now, manufacturers producing overseas have new options to bring manufacturing to the U.S.
Repatriation Tax Holiday of Foreign Earnings
The repatriation provision allows companies with funds abroad to bring back profits at a lower tax rate than before. The ability to bring funds from overseas back to the U.S. will allow manufacturers to invest in property, plants and equipment.
Changes are likely to benefit small-to-medium sized businesses overall, as they typically have more constraints on their resources.
Corporate Repatriation of Foreign Earnings Has Previous Precedent
In 2005, following implementation of the Homeland Investment Act which allowed companies to repatriate foreign earnings at a one—time flat rate of 5.25%, an estimated $300 billion was repatriated — or more than half of foreign earnings by U.S. multinationals.
Source: PNC Financial Services Group, Inc.
Increased Demand for Manufactured Goods
The bill lowers personal income taxes for middle and upper middle—class households, which could stimulate demand for durable goods from automobiles to consumer products such as appliances, benefiting discrete manufacturers and distributors as well as retailers of manufactured goods.
Will Tax Reform Make American Manufacturing Great Again?
Manufacturers are optimistic. When executives at more than 500 U.S. goods—production outfits were polled, 65% believed comprehensive tax reform would allow them to increase capital investments into new equipment and facilities. More than 64% said they'd be able to expand their business operations and 57% said they'd bring on more workers.
Source: National Association of Manufacturers
Epicor CEO Steve Murphy
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More than 20,000 customers in 150 countries around the world rely on Epicor expertise and business software solutions to improve performance and profitability.