Federal Tax Proposal Could Cost Texas over 100,000 Jobs
TAX PROPOSAL DRASTICALLY INCREASES GILTI RATE
Congress is considering major tax hikes on American businesses that would deal devastating blows to the Texas economy. At a time when we are struggling to recover from a worldwide pandemic, the proposed changes to the Global Intangible Low-Taxed Income (GILTI), a minimum tax on US multinational corporations (MNC) foreign earnings, would slash Texas jobs and hurt the ability of American companies to compete on a global scale.
Proposed changes include drastic increases to the GILTI rate, 10.5% to 21%, and eliminating a
job-creating incentive (a 10% rate of return on tangible assets).
TAB RELEASED ESTIMATED ECONOMIC IMPACT
The estimated economic impacts of the proposed changes to GILTI can be read in this preliminary report prepared on behalf of the Texas Association of Business by EY’s Quantitative Economics and Statistics (QUEST) group and the Bureau of Business Research, University of Texas at Austin. The report found that the proposed changes could cause our state to lose up to 107,000 jobs when combining impacted U.S. MNCs and related economic activity.
With 894,000 U.S. MNC jobs in Texas, the proposed changes are a direct threat to our state’s economic recovery. MNCs in the energy sector alone employ millions of Americans nationally and serve as a significant driver for our state’s revenue. According to the Texas Oil and Gas Association, the oil and natural gas industry paid $13.9 billion in state and local taxes as well as state royalties in FY 2020. These funds support our schools, hospitals, roads, and a multitude of other state services.
THERE IS NO REASON TO CHANGE GILTI
The proposed GILTI changes assume that the foreign activities of US MNCs are a substitute for domestic activities. But a number of studies going back over 40 years suggest that is not the case: the overseas operations of U.S. MNCs complement their U.S. domestic operation.
U.S. MULTINATIONAL CORPORATIONS BOOST EXPORTS
Investing in locations overseas strengthens our global competitiveness. Multinational corporations have the advantage of leveraging their proximity to markets to make and sell products or parts of products that are more efficiently produced and sold abroad. This is a serious cost-saving — and business growth opportunity. When American companies expand globally, they gain local distribution, sales networks, and local goodwill, which ultimately maximizes our nation’s ability to export.