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IRS's 199 tax break not fair, says Michigan Senator Debbie Stabenow

Dec 12, 2016

A bill to give a tax break to companies that contract manufacturing work for other companies is being introduced in the U.S. Senate. 

U.S. Senator Debbie Stabenow says Section 199 of the tax code is one of the largest tax incentives available to boost domestic manufacturing.  It gives manufacturing activities a 9% tax deduction. 

But the law is unclear whether a company that manufacturers something for another company should also get the deduction.  A bill co-sponsored by Stabenow and Ohio Republican Senator Rob Portman makes it clear that it should. 

The Senators say the tax break encourages job creation in manufacturing.

The bill faces more than an uphill battle, however. 

The "Better Way" blueprint issued this summer by the House Tax Reform Task Force, named by Speaker Paul Ryan, proposes to reduce the corporate tax rate to a flat rate of 20%, and eliminating special tax deductions, including Section 199.

Republican leaders are hopeful that the next President will be open to such reforms.

On the other hand, the Better Way blueprint would require dramatic changes to taxation and spending in the U.S. that could prove disruptive and unpopular.

Reducing the corporate tax rate to 20% across the board would likely require massive cuts to government spending, as well as tax increases on individuals, and closing loopholes used by ordinary Americans.