Will GOP Tax Plan Help Or Hurt Ohio Industries? Economists Weigh In
The GOP tax plan isn't done yet, but economists and tax policy experts are already predicting the final law would have a significant impact on some of Ohio’s biggest economic sectors: manufacturing and health care.
Manufacturers Would Make Out Pretty Well
The manufacturing sector, which makes up about 18% of Northeast Ohio's economic output, would be one of the big beneficiaries under the Republican plan, said Mark Sniderman, Executive in Residence at Case Western Reserve University and former Chief Policy Officer at the Federal Reserve Bank of Cleveland.
On top of lowering the corporate tax rate from 35 to around 20 percent, and reducing taxes for pass-through businesses like partnerships and s-corps, both the House and Senate versions of the tax plan would allow companies to deduct the cost of new equipment purchases immediately. That's different from the current system, which requires equipment purchases be expensed over many years.
“In Ohio, we're a pretty manufacturing heavy state, so that's going to allow a lot of companies to accelerate their investment,” said Michael Jones, an Assistant Professor of Economics at The University of Cincinnati.
Although the incentive would phase out after 5 years, said Jones, that may be enough to convince a manufacturer to finally invest in that new widget press they've been mulling over.
"I see some modest economic benefits over the next couple of years, said Sniderman, “but then I see those benefits gradually fading out.”
Republicans argue that that investment, coupled with the other changes in the tax code, will spur growth in jobs and wages.
“I'm pretty skeptical of that,” said Amy Hanauer, Executive Director at the nonprofit think tank Policy Matters Ohio. “It’s pretty clear that they'll increase corporate profits,” she said. What’s less clear, Hanauer added, is whether companies will use that increased profit to invest in their workforce or their shareholders.
"Companies expand when there's more demand," not just because there's more money in the company coffers, she said.
Health Care Could Take a Hit
A provision in the Senate tax bill would repeal the Affordable Care Act's individual insurance mandate. That provision is expected to make it to the final bill as the Senate in July tried and failed to do get rid of the mandate through a “skinny repeal” of the ACA.
A repeal of the mandate likely means fewer people will get insured, said Hanauer, making premiums more expensive for those who do. The result, she said, is that people will end up consuming less health care services, which would hurt health care providers' bottom lines, and eventually result in fewer jobs in Ohio's health care industry.
Hanauer said that's especially important for Ohio, where four of the top 10 employers are hospital groups, and 10 to 15 percent of all jobs are in the healthcare industry.
The House and Senate are currently reconciling their bills in an effort to meet a Christmas deadline set by President Trump.