| > The EITC is for individuals that have low incomes, AFAIK. Can you elaborate on how the EITC would increase the amount of US manufacturing? The EITC is an example of a "tax cut" that allows for negative tax rates. > Can the tax loss be sold separate from the legal entity itself? Actually selling the tax loss is generally only done for defunct companies, since a company expecting a future profit would just keep it in their pocket to use themselves later. Although you could probably still do it if you wanted to by splitting the company in two and then selling the one that "owns" the tax loss or something similar. > Are you saying that without the TCJA, none of these would have been built? I'm saying that private entities can build things like that. > If a business needs $10 million in capital to buy the machinery necessary to make widget X, and has to compete with an existing factory that produces equivalent widgets and has paid off their existing machinery, how can they compete? The real issue is that if you add a factory, you could be in a situation of overcapacity, and then you're locked in price competition and selling at thin margins, which nobody likes. The secret is this. Factories have a finite lifetime, e.g. 30 years. So you have an incumbent that has paid off their factory. It's 28 years old. You pay $10M to build a new factory, today. They're going to drive prices below your cost for two years, but then they're going to have to build a new factory themselves... and bow out, because the alternative would mean being locked in unprofitable price competition with you for another 28 years. So you win the market and can go back to charging profitable margins. You just have to time your entry right, i.e. finish your construction just before they start on theirs. Assuming you're even two different companies. Otherwise you just build your company's new factory in the new place whenever the old one in the old place is ready to be mothballed. > The existing business already has relationships with suppliers, customers, and distributors, and if the new entrant looks like it will be trouble, they can just cut their profit margin such that the new entrant will be struggling to cover the extra expenses associated with building all of those relationships while paying off the loans to acquire the machinery. To some extent this is also just a war of attrition. If a new entrant causes oversupply for any reason then it persists until somebody goes out of business. This has more to do with who has more money they're willing to set fire to in order to capture a given amount of market share than who was in the market first. One way to help your people win is to ensure cheap access to capital (i.e. low interest rates), but that's already there in the US. > Or one could say that the Republicans are unwilling to play ball as well (eg. over COVID-19 related stimulus). It was your impression that the Republicans were the ones holding this up? They had every political incentive to accept any reasonable bill before the election, and even now to do it before the inauguration in order to take credit for it. > The fact is, whether one party is at fault over the other, Americans and US businesses are paying the cost of the lack of bipartisan initiatives to improve the state of US manufacturing. On this we agree. |