New Administration. New Policies.
he election is over and while I will not pontificate on personal political views, the reality is that there is a new administration that will undoubtedly bring about new policies and perspective that will impact economic development efforts nationally, regionally and locally.
Our team has spent considerable time contemplating how new administration policies may impact economic development trends and offer the following broad based thoughts.
Tax Policy – the administration’s stated goal is to simplify the tax code by reducing the corporate income tax rate from 35% to 15%, lowering the top income tax bracket from 39% to 33%, and cutting the number of income tax brackets from 7 down to 3. Should these tax modifications occur, the resulting benefit to the overall economy may be positive, job growth will likely be healthy and personal income growth may boost demand for retail and industrial products.
Regulatory – the publicized objective is to reduce bureaucratic red tape by dismantling Dodd-Frank, restructure healthcare, and make energy independence a priority. Should there be success in easing regulatory oversight, the financial sector may head into a stronger growth mode, demand for pharmaceutical and biotech companies may increase and energy producing markets could benefit from more business friendly policies.
Government Spending – with the nation’s crumbling infrastructure, the federal goal of spending $1 Trillion on infrastructure over the next 10 years is welcomed and particularly impactful to economic development projects. Infrastructure spending, along with the elimination of sequester on the defense spending, would likely be favorable to all U.S. markets, defense agencies and contractors.
Trade and Globalization – current discussion includes halting all new trade deals, pulling out of existing trade agreements (TPP) and enforcing existing trade policies more strictly and renegotiating treaties, such as NAFTA. From a historical perspective, restricting trade has had a negative impact on the U.S. economy. Furthermore, industrial port cities could be negatively impacted by a reduction in exports due to changes to trade agreements.
With the above in mind, the following sectors of the economy may stand to benefit the most from the outlined policy shifts;
- Defense: more spending for defense programs
- Retail: tax cuts resulting in more disposable income
- Energy: fewer regulations will help energy producing regions of the U.S.
- Manufacturing: more demand for higher value products resulting in economic growth
- Financial Services: deregulation boosts opportunity for growth
- Construction: increased activity due to infrastructure spending and building construction
- Technology: stronger economy results in greater demand for technology products and services
- Pharmaceutical/Medical Devices: expedited regulatory process to bring products to market and elimination of the medical device tax that was included in the Affordable Care Act, positions life sciences companies for more economic growth.
As we move a bit further into2017, other economic development trends we are observing as we support client projects throughout North America and the Caribbean include:
- State and local agencies are being required to demonstrate the effectiveness of their economic development incentive programs. Twenty-three states have now enacted incentive evaluation laws to ensure that the incentives being offered effect the intended results.
- Corporate clients continue to be interested in incentive programs that are cash or cash equivalent.
- Projects are being driven in part by creative structuring of incentives such as reduced land costs, infrastructure improvements, flexible tax credits, expedited permitting, and reduction of impact and development fees. These types of incentive tools are impactful in reducing long and short term operating costs.
A few recent incentive policy updates from the around the U.S.
- California – passed legislation allowing small companies with unutilized tax credits from 2015/2016 to convert them to cash grants within 2017.
- Colorado – passed legislation that will qualify companies for the Job Growth Credit, if the company partners with colleges and universities in the state.
- Illinois – due to the current $4 billion budget deficit, all business attraction and incentive programs have been suspended as of April 30, 2017.
- Indiana – Regional Cities Initiative, the utilization of $126M obtained from a tax amnesty program to fast track projects that improve quality of life, make regions more dynamic and attract evolving workforce.
- Iowa – expansion of the solar energy tax credit now capped at $5M/year. Also, implementation of a 10 year property tax exemption for high speed broadband infrastructure improvements.
- Michigan – signed a new sales tax exemption law for data center equipment sold to an operator of a qualified data center or co-located business.
- New Mexico – new law restoring a deduction for trade companies that locate within 20 miles of the U.S./Mexico border.
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PODCAST EPISODE July 2021 – Rick Weddle, President of the Site Selectors Guild, and Larry Gigerich, Executive Managing Director of Ginovus, discuss the importance of water resources in economic growth and development in the 50th episode of the Site Selection Matters podcast here. Back to Events KEEP READING July 2021 – Podcast on […]
Job Posting: Incentives Compliance, Client Advisor – July 2021 Position: Incentives Compliance, Client Advisor Reports To: Director, National Accounts and Ginovus leadership team Be Part of Our Team Come work for a globally recognized boutique firm with over 100 years of combined economic development and site selection expertise! Since 2002 the Ginovus team has been […]
April 2021 – Podcast on How a National Infrastructure Plan Positions the U.S. for Long-term Economic Growth
PODCAST EPISODE April 2021 – Rick Weddle, CEO of the Site Selectors Guild, and Larry Gigerich, Executive Managing Director of Ginovus, discuss why infrastructure should be seen as a long-term investment and how a national infrastructure plan can position the U.S. for economic development growth on the latest episode of Site Selection Matters podcast […]