Trump talks $7M tax break at Carrier; PU prof. says maybe not so good for taxpayers

The state of Indiana has offered Carrier a $7 million tax break over 10 years and Trump said he's working on more incentives for companies nationwide. (WLFI Photo)
The state of Indiana has offered Carrier a $7 million tax break over 10 years and Trump said he's working on more incentives for companies nationwide. (WLFI Photo)

INDIANAPOLIS (WLFI) — The state of Indiana is offering Carrier a $7 million tax break over 10 years, and President-elect Donald Trump says he’s working on more incentives for companies nationwide.

Trump and Vice President-elect Mike Pence were at the Indianapolis Carrier Plant Thursday afternoon to celebrate their deal with Carrier to keep more than 1,000 jobs in Indiana, instead of moving them to Mexico.

As News 18 previously reported in February, Carrier announced it would send 1,400 hundred jobs to Mexico. But Trump used Carrier as an example in his campaign saying he would tax anyone who moved jobs to Mexico. He still says he’s going to do that, but now he’s offering specific incentives to stay.

Trump says he plans to lower the business tax from 35 to 15 percent and focus on changing regulations. He says since about six years ago, 260 new federal regulations have passed – 53 of which affect the Carrier plant.

Trump called those federal regulations massively expensive.

“Probably none of them amount to anything in terms of safety or the things you’d have regulations for,” he said.

Carrier workers in the room got excited when Trump said companies are not leaving the U.S. anymore without consequences. He explained those who choose to move jobs to Mexico will be taxed very heavily at a “very strong” U.S. border.

Edward Robinson, a Carrier worker, said he’s one of the employees that’s going to keep his job as a result of the deal. News 18 asked him what he thought about the incentives Trump talked about in his speech.

“If it’s going to help business stay here in Indiana, I’m all for it,” Robinson said. “And [stay] here in the United States, I’m all for it.”

Trump also assured the crowd that he will, in fact, build a wall. He said we love Mexico, but we have to get our fair shake.

Trump didn’t say anything about the company’s plant in Huntington, United Technologies Electronic Controls, which is moving 700 jobs to Mexico. UTEC employees said they feel forgotten by Trump.

News 18 spoke with Dr. Jillian Carr, assistant professor of economics at Krannert School of Management, to get her thoughts about the long-term financial effects for the state and locally. She said the role of federal contracts raises many questions.

“Does this Carrier deal set a precedent? How does the government make a decision about when to intervene in such issues? Dr. Carr asked. “Indiana is an obvious choice currently because Mike Pence is still the governor. In the future, though, will these interventions occur in places that have disproportionately more representation in the Electoral College or in swing states? The distributional effects of these targeted interventions could be large.”

But who pays for these incentives? Dr. Carr explains.

  1. Indiana Taxpayers – If there are financial incentives from the state of Indiana, then those funds are going to come from Indiana taxpayers. This doesn’t necessarily mean increased tax rates, as program cuts can also generate the funds needed.
  2. Consumers – The tax incentives in the U.S. are much less than Carrier expected to gain by moving the jobs to Mexico, so one of the other ways they could make up the difference is by increasing prices. In short, the products are likely to be more expensive.
  3. Future workers – Broadly, the more pressure we put on manufacturers to keep production domestic, the more we incentivize the development of technology that can do manufacturing jobs. This in turn gives way to equipment that will ultimately reduce the number of humans needed to do a job.

She believes this could come at a cost to Indiana taxpayers, potentially losing government services.

Dr. Carr says threatening tariffs on companies moving jobs to Mexico could entice them to create technology that reduces the number of humans they need to employ. She points out that’s what could impact the future of manufacturing jobs in Lafayette.

At Carrier, Trump called his relationship with Indiana a “love affair.” The plant was Trump’s first stop of what he is calling the USA Thank You Tour.

The tour is expected to travel to several states – those of which helped Trump win the election. Trump and Pence are now headed to Cincinnati to hold a campaign style rally.