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Perhaps my memory is fading, but I don’t recall a President-elect addressing the nation’s business interests as quickly as the Trump administration recently intervened with Carrier Corporation. No doubt, Indiana Governor and Vice President-elect Mike Pence played a role in the recent Carrier deal. The incoming administration’s success in saving Indiana jobs discredits cynics who charge that political campaigns are all about rhetoric without any real follow up. But as with any political situation, expect different perspectives on the deal to become fodder for conversation. Questions arise quickly about other companies wanting their share of a bailout and what about other taxpayers? Where's their break? There is perhaps no perfect answer.
The Trump administration is committed to reducing corporate tax rates down to a more reasonable level – likely between 15% and 22%. Shortly after the Carrier announcement, the future administration issued a warning that companies who seek to relocate outside the U.S. and sell their products back to U.S. buyers, can expect to be taxed at the 35% rate.
You will undoubtedly be hearing much more about three programs soon to come under scrutiny. Each program has hard line supporters and critics. Here in the Midwest, many people are unaware of how heated the discussions may become. Details of such programs include provisions that allow foreigners to apply for American jobs without becoming U.S. citizens and without the opportunity to pursue citizenship and permit non-citizens to work for substantially lower wages than their American citizen counterparts typically receive.
Some argue the U.S. doesn’t graduate enough STEM (science, technology, engineering, and mathematics) students each year to keep up with U.S. employers’ needs. But public data along with research conducted by Dent Research shows that the U.S. graduates more than two students for every available job. The question to wrestle with is whether the U.S. graduates as much as their foreign counterparts.
Three various visa programs exist today that allow for U.S. businesses to win permits in a lottery to bring in foreign workers. H-1B brings in higher educated employees possibly used to displace an American worker for a lower wage. The L-1 program allows U.S. companies to engage foreign employees who come to the U.S., develop skills and knowledge about the business and then return overseas to build an entire operation. Another 180,000 visas were issued in 2015 for workers with lower income and lower skills. The H-2A is offered to agricultural workers and the H-2B visa is available to non-agricultural workers.
The following question will certainly arise as the conversation about jobs and commerce continues: Is it right for businesses to operate at the lowest possible cost for the shareholder, or those residing on Main Street, USA? Do we want a global system that rewards the person who will work for the lowest cost at the expense of U.S. graduates? Answers will not be simple and I cannot possibly know the final outcome. What I do know is the answers will affect business and workers.
Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column offset=”vc_hidden-lg vc_hidden-md vc_hidden-sm”][vc_widget_sidebar sidebar_id=”sidebar-main”][/vc_column][/vc_row]