Santorum's plan to help manufacturers leaves questions unanswered

McClatchy NewspapersFebruary 16, 2012 

WASHINGTON — Thanks in part to his pro-manufacturing message, former Pennsylvania Sen. Rick Santorum's poll numbers are soaring in the blue-collar states of Michigan and Ohio, which soon hold GOP presidential primaries.

His surge comes as Santorum pledges to eliminate corporate taxes for American manufacturers, a populist pitch that experts warn actually would be hard to pull off.

At times, Santorum's common-man message can sound like the stump speech of union-courting Democrats running for office in the Rust Belt. On his campaign website, Santorum labels his tax platform Made in America. That plan proposes collapsing all income tax brackets to just two — 10 percent and 28 percent. He'd also cut in half the corporate tax rate, from 35 percent to 17.5 percent.

But the part that's attracting the most attention in the Rust Belt is his pledge to eliminate corporate taxes altogether for U.S. manufacturers.

That, his website said, would "spur middle-income job creation in the United States and will create a job multiplier effect for workers."

Santorum, however, has not said how he'd pay for these generous business tax breaks. Nor has he given much direction on his broader tax plan, leaving experts to do little more than guess how it might work.

"There is not enough 'there' there. It lacks the details for it to be a real tax plan that you can implement," said Roberton Williams, a senior researcher at the Tax Policy Center, a joint project of the Brookings Institution and the Urban Institute, two Washington center-left think tanks. "It gives a sense of the basic parameters of what he wants to do."

The Santorum tax plan's broad strokes make it hard to gauge, but Williams and his fellow tax experts think the Santorum plan would cost the Treasury between $900 billion and $1.3 trillion in 2015.

"We had to do a lot of guessing. We did ask the campaign for more information and didn't get it," said Williams. The Tax Policy Center is non-partisan and tries to score the costs of all candidates' tax proposals.

"The benefit of a campaign is you get to talk directionally without having to be detailed," said John Engler, a former Republican governor of Michigan and current head of the Business Roundtable, an influential association of major corporate CEOs.

One of the Santorum plan's mysteries is just who would qualify as a manufacturer. The Tax Policy Center assumed it would be the same companies that apply for tax deductions for domestic production activity. But that's not clear from Santorum's vague plan.

The distinction between who is a manufacturer vs. who is engaged in manufacturing activity is a blurry one. Many manufacturers have farmed out what they once had done internally — things such as logistics, warehousing and even technology. New providers of these functions are like satellites to a manufacturer, but they are considered service providers in government statistics.

It's also not clear that taxes are behind the steep drop in manufacturing jobs in recent decades, or that ending corporate taxes on manufacturers would necessarily mean lots more jobs. Machines replace manpower in modern manufacturing.

"Manufacturing in particular has been, politically speaking, a victim of its own success," said Engler, a former head of the National Association of Manufacturers. Improvements in productivity — a worker's per-hour output — has allowed manufacturers to do more with fewer workers, he said.

Engler pointed to the automotive sector, which is on pace to produce 13 million cars this year with considerably fewer workers than the last time production hit these levels.

Martin Regalia, chief economist for the U.S. Chamber of Commerce, said in a recent interview with McClatchy that the best way to help manufacturing is to adopt "pro-growth" energy policies that keep the cost of oil and natural gas low. Manufacturers are among the largest users of electricity, gas and oil.

The National Association of Manufacturers declined comment on the specifics of Santorum's proposals, but spokesman Matthew Lavoie said in a statement that it is "pleased that manufacturing continues to be a focal point in the policy debates this election cycle (over) creating jobs and growing the economy."

ON THE WEB

Santorum tax plan

Tax Policy Center scoring of Santorum's plan

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