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1 Erica York, et al., Taxes, Tariffs, and Industrial Policy: How the U.S. Tax Code Fails Manufacturing 1 (2022)

handle is hein.taxfoundation/tstfsadil0001 and id is 1 raw text is: Taxes, Tariffs, and Industrial Policy: AxHowthe U.S. Tax Code Fails Manufacturing FISCAL Erica York Economist FACT Alex Muresianu Federal Policy Analyst Alex Durante Federal Tax Economist No. 788 Mar. 2022 Key Findings • Policymakers on both the left and right have brought industrial policy back into focus after slow growth over the past few decades and growing concern over the state of America's manufacturing sector. • In the context of the tax code, industrial policy usually comes in the form of non-neutral subsidies for specific industries or sectors, or taxes on imports (i.e., tariffs) of particular goods to protect a specific domestic industry. • The existing tax code is biased against capital-intensive manufacturers, as it prevents companies from deducting capital costs the same way they deduct labor costs. • Fixing the bias against capital investment is preferable to pursuing industrial policy through the tax code, as subsidies tend to be ineffective and tariffs often weaken protected domestic industries and harm downstream industries. The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and global levels. We are a 501(c)(3) nonprofit organization. ©2022 Tax Foundation Distributed under Creative Commons CC-BY-NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org