Don't boycott Harley-Davidson bikes — boycott its tax cut

Don't boycott Harley-Davidson bikes — boycott its tax cut
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An iconic American brand moving production overseas is not unique to Harley Davidson. Levi’s, the iconic American jean company that outfitted the goldminers in Northern California during the 1800s, now makes most of its jeans everywhere but California.

Not to be outdone, Winchester, the iconic American gun manufacturer, has been manufacturing guns in Japan since the 1960s. Remember the iconic little red wagon made by the Radio Flyer company? That quintessential slice of Americana is actually made in China. 

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How about the uber-American Barbie Doll? She, too, calls China home. Harley Davidson may be getting all the negative press today, but there are many iconic American brands that produce their goods overseas.

   

Thanks to Congress, companies were not required to hire in America to receive the recently passed tax cuts. Companies can close factories, move jobs overseas and receive the same tax cuts as companies hiring in America.

Worse still, companies now have an incentive to move production outside the U.S. Once again, we have Congress to thank as American companies making goods outside the U.S. and selling outside the U.S. are no longer subject to U.S. corporate taxes. I’d love to negotiate a deal with Congress, but I sure don’t want them negotiating on my behalf.

The real issue is that our esteemed Congress was so determined to pass any tax cut that they passed a tax cut with more holes in it than Swiss cheese. In cutting corporate tax rates and hoping companies would hire Americans, they did the equivalent of giving a child dessert and hoping they would eat their vegetables later.

It was such an obvious mistake that Congress was either incompetent or not really focused on job creation. It is difficult to believe that Congress could have been so clueless as to not figure out that they should tie corporate tax cuts to the very reason stated for the tax cuts: job creation.

Of course, given all the career politicians in Congress, it is possible that they didn’t have the necessary experience to know how to craft a simple tax incentive for companies to create jobs and reward the companies creating jobs.

Instead, they passed universal tax cuts giving tax breaks to all companies, creating an environment where free-loader firms could fire Americans and still benefit from the tax cuts alongside companies creating jobs. Thanks Congress. 

While it makes for good politics that plays to the president’s base, boycotting Harley Davidson bikes is not the best way to encourage it to keep jobs in America. Boycotting U.S.-made Harleys would penalize the American workers producing the bikes in the U.S. Instead, focus on the real issue: making it less economical to move production overseas.   

First, Congress and the president should rescind Davidson’s tax cuts. In finance, this is called a “clawback”: U.S. taxpayers claw back the tax cuts given to companies that were supposed to create jobs but instead laid off Americans.

If the purpose of tax cuts was to incentivize companies to increase hiring, but a company instead moves jobs overseas, why should the firm keep the tax cuts? 

Second, fix the flawed corporate tax cuts so that corporate tax cuts are tied to company hiring. In finance this is called an “earnout." In an earnout, companies would earn their tax cuts after they produced what they said they would in return for the tax cuts — more jobs. 

Last, tie corporate tax cuts to company wage increases. American workers were promised a minimum $4,000 wage increase in one year. Americans were promised that cutting corporate tax rates would yield a wage growth tsunami. Unfortunately, there has been a wage growth trickle while the tsunami seems to be in our increasing debt levels.

Making America great should be about providing merit-based incentives for great American brands to produce in the U.S. through revised corporate tax cuts that make corporate tax cuts contingent on what Americans were promised, more jobs and higher wages.

Chris Macke is the founder of Solutionomics, a think tank focused on developing solutions for a more efficient, merit-based corporate tax code. He has advised the U.S. Federal Reserve by providing market updates and implications of monetary policy changes on asset valuations and market distortions, and he's a contributor to the Fed Beige Book. Find him on Twitter: @solutionomics.