Published Opinion - Bennett: Federal rule threatens North Texas job growth
October 4, 2016
By Tony Bennett, president and CEO of the Texas Association of Manufacturers
Texans are deeply proud of our state’s business-friendly climate and our hardworking people.
Consistently named as one of the top states for business, if Texas were a country it would rank 10th globally in economic output, just behind Brazil.
Look no further than the greater Dallas-Fort Worth area.
With its combination of location, natural resources and pro-job-creation policies at the local level, Dallas-Fort Worth is home to a significant number of major manufacturers, such as Lockheed Martin, General Motors and Texas Instruments.
In fact, Dallas-Fort Worth has more manufacturing activity than any other metropolitan area in the state, employing more than a quarter of a million Texans and playing a vital role in boosting the region’s economy.
While many factors are working to our collective advantage, never ending streams of Obama administration regulations threaten our positive momentum.
The most recent assault on good-paying jobs and private sector growth by Washington bureaucrats is the Treasury Department’s Section 385 regulation.
This proposal is supposedly intended to create roadblocks aimed at corporate “inversions,” when a U.S.-based company merges with a foreign entity for tax-related advantages.
However, the proposal is crafted in such an unnecessarily broad manner that it will have damaging consequences for Texas manufacturers that have no intention of pursuing an inversion.
Specifically, these proposed rules would fundamentally disrupt longstanding cash management strategies used by businesses, making it more difficult and costly to execute day-to-day, necessary operations.
Today, businesses use “cash pooling” strategies that are similar to the methods many families use to manage their household budgets and pay their bills.
In the family scenario, two working spouses may put their individual paychecks into one checking account and then use that joint income to pay the mortgage or cover daycare and other household expenses.
Businesses do the same, just on a larger scale.
But if Treasury has its way, this basic cash management strategy, which allows manufacturers to make payroll and process invoices, would be outlawed.
That’s just one of the many examples of how Treasury’s blunt approach creates too much uncertainty and throws a wet blanket on job creation.
Business leaders from across the country, including from our region, are speaking out.
Nearly 40 CEOs expressed deep concerns with the administration’s proposal, arguing in a recent public comment letter that this proposed regulation would “further reduce the competitive position of U.S. businesses” and have a “destructive impact” on the ability for “U.S. businesses to invest and create jobs.”
What’s more, a recent PwC analysis concludes that Section 385 will “cause a large reduction in the amount of U.S. investment by foreign-based multinational companies.”
This is significant because Texas ranks first in the nation for foreign and domestic investment.
More than 1,500 foreign corporations have located in the Lone Star State, with Texas ranking third for total new foreign direct investment projects over the past five years. That’s more than $212 billion in capital investment injected into the Texas economy since 2011.
Despite these concerns, the Obama administration is moving forward with these destructive proposals at an alarming pace.
In the rush for a political quick fix to a very complex — yet limited — issue, the administration has failed to properly ensure that domestic job-creators, and those seeking work in the U.S., will not be unjustly harmed.
Instead of hastily throwing together a tax proposal that does more harm than good by making our tax code even more burdensome, why doesn’t Washington work toward comprehensive, broad-based tax reform?
That way, instead of punishing the manufacturers and businesses that make up the backbone of our economy, we can ensure they continue to thrive.
Tony Bennett is president and CEO of the Texas Association of Manufacturers.
View this column as published in the Fort Worth Star-Telegram.