MAPI Report: 2011 Federal budget tax proposals will hurt manufacturers

Bipartisan Tax Fairness and Simplification Act of 2010 would have a more positive effect on business, report finds

A new report from the Manufacturers Alliance/MAPI finds that tax increases in President Obama's 2011 budget proposals will have unintended adverse consequences on American businesses, particuarly manufacturers, and that an alternative bipartisan proposal would have more positive effects.

The new report is titled: A Closer Look at the Business Tax Burden: C-Corps, S-Corps, and the Impact of the Federal Budget's 2011 Tax Proposals. In it, economic consultant and report author Jeremy Leonard says that while the plan calls for the corporate tax rate to remain unchanged, efforts to broaden the base would increase the aggregate business tax bill by more than $350 billion over the next 10 years, amounting to a 6% tax increase relative to the pre-budget baseline.

Leonard also says the Administration's proposal results in an increase in the federal deficit of $100 billion relative to the baseline. Alternatively, he says a competing proposal from Sen. Ron Wyden (D-OR) and Sen. Judd Gregg (R-NH) adds to GDP growth and employment and reduces the deficit by $300 billion relative to the baseline. That proposal is the 2010 Bipartisan Tax Fairness and Simplification Act.

The MAPI report also examines the effects of the 2011 federal budget's tax provisions on "pass-through" businesses, which include nearly four million S corporations and more than three million partnerships, accounting for 80% of U.S. businesses and a third of U.S. business activity, according to MAPI. The report claims that pass-through businesses in the manufacturing sector will see their tax bills increase by an average of 14 percent.