Trump says he wants to tax companies that move their jobs. Makes sense in a way. “35% tax if your company moves its jobs out of US”.
The Wall Street Journal thinks it is dumb, and Trump apparently thinks they are dumb:
thehill.com/media/309845-trump-wall-street-journal-doesnt-understand-business#
Here is what would really happen:
1. Some companies would simply move their entire HQ out of the US. Lower cost and no tax penalty. Now they don’t pay any US tax.
2. Some would just close their factories, and buy finished goods from NEW companies set up offshore, to make their goods. They aren’t moving anything.
3. Nobody would open a new factory in the US, because it comes with the overhead that it is hard to move or modify.
4. Like Carrier, companies will just do more automation and less “move the jobs”. The jobs would still get lost.
5. “Contract manufacturing” will expand, which is what Apple does when they contract Foxconn to make iPhones. Direct factories are what this regulation hits.
6. New “inversion” concepts would multiply – sell your factory to a foreign company, then THEY shut it down, but keep supplying ACs under the Carrier name. There might even be specialty Private Equity firms that are NOTHING BUT offshore money designed to pocket a piece of the money saved.