Why Manufacturers are Mixed on Obama’s Plan to Save America’s Infrastructure

“America’s world-class infrastructure is falling behind the rest of the world.” reads the first paragraph of the President’s recently released 2016 budget plan on transportation. The plan then outlines nearly half a trillion dollars in spending on the nation’s aging bridges, highways, public transportation, and shipping routes.

While the proposed budget should be a win for suppliers because it could make it much easier for businesses to transport goods, it’s received mixed reviews from manufacturers because of the proposed source of this spending—a sharp tax increase on companies’ foreign earnings.

 

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What the President’s Plan Is

  • Nearly a trillion dollars of spending on infrastructure, with a 33% increase in funding for public works projects

  • Transportation improvements include: rebuilding bridges, highways, local roads, high speed rail, expansion of mass transit

Where the Money is Coming From

  • A one-time 14% “repatriation” tax on nearly $2 trillion of corporations’ past foreign earnings

  • A permanent 19% tax on companies’ future foreign earnings

Possible Benefits for Suppliers

  • Upgrades to highways could help small and large business owners alike trying to transport and deliver their products

  • A credit for manufacturing research and development

Possible Problems for Suppliers

  • Increase in taxes on foreign earnings could cost manufacturers who profit overseas

Industry Reactions

Bottom Line

Across party lines, politicians and industry leaders seem to agree that the US needs to reinvest in its transportation arteries: its highways, bridges, and ports—as at the moment, they're hurting.

For example, 65% of America’s major roads are rated as being in “less than good” condition. Suppliers transporting goods on the ground across the country will want to see these roads fixed before they become roadblocks in running a healthy supply chain.

But exactly how America will foot the bill for this investment in supply chain will be a subject of debate for the months to come.

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