Tax hikes proposed by the Biden administration place tens of thousands of Arizona jobs at risk, according to a new analysis conducted by the Seidman Research Institute at Arizona State University and Ernst & Young.
Looking for revenue to help pay for trillions of dollars in new spending, President Biden and congressional leaders have backed a $3.5 trillion package, which includes a slew of tax hikes – the bulk of which are aimed at employers and upper-income Americans. One provision in particular – a planned doubling of the Global Intangible Low-Tax Income (GILTI) rate – would hammer companies based in the U.S. but with operations overseas.
ASU Seidman and Ernst & Young found that 266 Arizona companies would be impacted by the GILTI increase. Specifically, according to the report, adoption of President Biden’s plan would:
- Eliminate up to 27,700 Arizona jobs in the first year following adoption, including as many as 42,500 total jobs if indirect losses are taken into account.
- Kill up to 46,800 Arizona jobs within the first five years.
- Reduce total economic growth in the state by as much as $5.1 billion in the first year and $6.4 billion over the course of a decade.
“At a time when too many Arizona employers are just now recovering from the pandemic, this multi-trillion-dollar series of tax hikes is one more blow we don’t need,” Arizona Chamber of Commerce & Industry President and CEO Danny Seiden said. “The tens of thousands of job losses forecast by this troubling report mean further economic downturn and reduced opportunity for Arizona workers and families.”
GILTI was intended to target foreign income derived from intangible assets like software services, trademark royalties, intellectual property and more. Unfortunately, its impacts have proven far broader, placing a surtax on essentially any U.S. company that reaches customers abroad. The Biden administration has proposed doubling the GILTI rate to 21%, up from 10.5%. Arizona employers warn the increase, especially when coupled with a raft of other proposed tax hikes, will kill jobs and reduce their competitiveness in a global marketplace.
“Our economic recovery remains fragile, and these tax increases are just one more headwind for Arizona businesses to face,” said Steve Trussell, executive director of the Arizona Rock Products Association. “Many of our members have operations around the world, and these proposed tax hikes put them at a real competitive disadvantage. Ultimately, it’s Arizonans who pay the price if these damaging tax policies are adopted.”
Certain industries would be hit hardest by the GILTI increase. For example: the ASU Seidman/Ernst & Young analysis found that the agriculture, cConstruction, mining and oil & gas sectors could lose more than 4,800 jobs in the first year. The manufacturing industry risks the loss of more than 8,400 jobs.
In recent days, the National Association of Manufacturers (NAM) released a survey that found nearly 94% of U.S. manufacturers believe higher taxes would harm their business; 90% said the hikes could hurt their ability to add workers, expand facilities, or invest in new equipment.
Issuance of the report from ASU Seidman and Ernst & Young comes as House Democrats race to finalize details of their budget reconciliation bill, which is likely to include a host of tax hikes. The package is expected to come to a vote before the end of September.