The 2024 election between Kamala Harris and Donald Trump is set to be pivotal for the manufacturing and distribution industry. Each candidate presents a distinct set of policy proposals that could dramatically shape the landscape of regulation, taxation, and labor practices. In this article, we explore key tax and non-tax proposals from both sides and discuss the potential outcomes for the industry depending on the election result. Finally, we briefly consider the possible impacts of a split Congress.
Harris Presidency: Focus on Climate Initiatives, Labor Rights, and Corporate Accountability
As the Democratic candidate, Kamala Harris is expected to continue many of the key initiatives put forth during her time as Vice President, while also emphasizing her own progressive agenda. The Harris platform places a strong focus on climate action, worker protections, and increasing corporate taxation, all of which could have far-reaching effects on manufacturing and distribution.
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Climate Change and Environmental Regulations
Kamala Harris has been a vocal advocate for aggressive climate action. Her platform calls for an accelerated shift toward renewable energy, a major reduction in carbon emissions, and stronger environmental protections. If elected, Harris would likely push for expanded regulations that directly impact manufacturing, particularly in energy-intensive industries.
For manufacturers this would include:
- Stricter emissions regulations and potential carbon taxes, driving up compliance costs for industries that rely on fossil fuels.
- Expanded federal incentives for green technology investment, benefiting manufacturers involved in renewable energy, electric vehicles, and other clean technologies.
- New regulations around supply chains to ensure sustainability and reduce environmental impact.
For distributors, the focus on sustainable practices may lead to increased costs related to transportation, as efforts to limit fuel consumption and reduce emissions intensify. On the other hand, there could be incentives to adopt more fuel-efficient logistics systems.
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Corporate Tax Increases and Expiration of the Tax Cuts and Jobs Act (TCJA)
Harris is expected to advocate for raising corporate taxes, though the specifics may differ slightly from the Biden administration. Her proposals could include:
- A corporate tax rate increase from the current 21% to as high as 28%.
- Higher taxation on capital gains and stock buybacks, which could impact companies that rely on equity financing for expansion.
- A renewed focus on tax fairness, possibly introducing a minimum tax on large corporations that have been able to reduce their tax burdens through loopholes.
- A focus on providing additional tax deductions to small businesses including increasing the deduction for startup businesses from $5,000 to $50,000.
These tax increases would have a direct impact on manufacturers, potentially reducing after-tax profits and limiting the funds available for reinvestment. For the distribution sector, which often operates on thin margins, higher taxes could also slow growth and expansion.
Harris would also let most major provisions of the TCJA expire in 2025. While she has pledged to not raise taxes on individuals making less than $400,000, many of the provisions in the TCJA benefited manufacturers and distributors and would end in a Harris administration.
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Labor Rights and Worker Protections
As a long-time advocate for workers’ rights, Harris’s policies would likely include:
- Increasing the federal minimum wage, potentially to $15 an hour or higher.
- Expanding paid family leave and health care protections for workers.
- Strengthening collective bargaining and union rights.
For manufacturers, these policies could lead to higher labor costs, prompting companies to seek productivity improvements through automation or operational efficiencies. Distributors, particularly those reliant on large workforces, would face similar challenges, with rising payroll expenses potentially cutting into profit margins.
Trump Presidency: Deregulation, Tax Cuts, and Protectionist Trade Policies
A second Donald Trump term would likely revive many of the business-friendly policies that defined his first term in office. His focus would center on deregulation, maintaining lower taxes, and reintroducing more aggressive trade policies designed to protect American manufacturing.
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Tax Cuts and Corporate Incentives
Trump is expected to continue pushing for lower corporate taxes and other pro-business tax reforms, including making the tax provisions enacted under the TCJA permanent. Key proposals would include:
- Lowering the corporate tax rate to 15% on domestic production to further stimulate economic growth.
- Expanding tax credits for domestic manufacturing and repatriation of jobs, potentially offering significant benefits to companies bringing operations back to the U.S.
- Renewing tax incentives for capital investments, such as 100% bonus depreciation on equipment and infrastructure upgrades.
For manufacturers, these policies would likely result in higher after-tax profits, giving businesses more flexibility to invest in new technologies or expand production capacity. Distribution companies would similarly benefit from lower tax burdens, providing greater capacity for expansion and infrastructure improvements.
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Deregulation
A cornerstone of Trump’s economic strategy is deregulation. Under his administration, the manufacturing and distribution sectors could see:
- A rollback of environmental regulations that Harris would likely expand, easing the compliance burden on businesses, particularly in energy-intensive industries.
- Loosening labor laws, providing employers with greater flexibility in hiring and workforce management.
- Streamlining the permitting process for new industrial projects, making it easier for manufacturers to expand or modernize facilities.
This deregulatory environment would reduce costs for both manufacturers and distributors, allowing them to operate more efficiently. However, critics argue that it could also reduce the emphasis on environmental sustainability and worker protections.
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Trade Policies
Trump’s trade policies are expected to focus on protecting American jobs and industries through significant tariffs and other trade barriers. This could include:
- Increasing or creating new tariffs on goods from countries like China to protect U.S. manufacturers from foreign competition, including a 10% tariff on all imports and raising the tariff on Chinese goods to 60%.
- Offering incentives for reshoring production to the U.S., encouraging manufacturers to move operations back home.
While these protectionist policies could benefit certain manufacturers by reducing foreign competition, they could also raise costs for businesses that rely on imported materials or components, creating challenges in sectors with global supply chains. Distributors, especially those handling international goods, could face higher import costs, leading to potential price increases for consumers.
The Impact of a Split Congress
Regardless of the outcome of the presidential election, if the election results in a split Congress—where one party controls the House and the other controls the Senate—the pace of legislative action is likely to slow significantly.
A split Congress would likely stall any major tax reform. With neither side able to push through sweeping changes. However, with the TCJA set to expire in 2025, there would likely be some compromise made between the parties to maintain certain provisions of the legislation, such as the Section 199A Qualified Business Income deduction.
New regulations or deregulation efforts could be delayed. Environmental and labor-related rules would face significant legislative hurdles, allowing businesses more time to adapt to existing frameworks. However, it is likely this would lead to further executive orders being taken by whomever wins the presidency. These measures often are then challenged in the courts, so significant changes would not be expected.
A split Congress might still find common ground on popular items such as infrastructure investment, as both parties recognize the importance of modernizing U.S. transportation and logistics networks. This could benefit distribution companies by improving the efficiency of supply chains.
Ultimately, the 2024 election presents two very different visions for the future of the manufacturing and distribution industry. A Kamala Harris administration would likely focus on environmental sustainability, worker protections, and corporate accountability, driving costs higher for businesses in the short term but creating opportunities for growth in green technology sectors. Conversely, a Trump victory would emphasize tax cuts, deregulation, and protectionist trade policies, creating a more business-friendly environment for traditional manufacturers but potentially increasing international trade tensions.
If you need further guidance or have any questions on this topic, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
