Under the new tax bill, the corporate tax rate will lower from 35% to 21%.
WASHINGTON — Passage of the largest tax overhaul the U.S. has seen in more than 30 years will bring many opportunities to the baking industry, said Robb MacKie, president and chief executive officer of the American Bakers Association (A.B.A.). The 2017 Tax Cuts and Jobs Act includes lower tax rates and temporary relief for capital expenditures for American businesses.
The greatest benefit the bill offers is a reduced corporate tax rate, lowering from 35% to 21%. Mr. MacKie noted the change will unleash unprecedented growth within the industry, allowing bakers to pursue endeavors they were previously reluctant to dive into.
“After a decade of piecemeal, stop-gap tax changes, bakers now have the clarity and consistency necessary to implement long-term sustainable growth strategies,” Mr. MacKie said.
The lowered rate and increased flow of capital will give bakers the chance to invest in facilities, equipment and research. It has the potential to drive innovation in an industry that has faced flat consumption for years.
It also will enable companies to allocate more resources toward workforce development and increased wages. In an increasingly competitive market, baking companies will be able to improve their workforce through cutting-edge training and create incentives that attract skilled employees.
Compared to other developed nations, U.S. businesses have faced some of the highest corporate tax rates globally. Mr. MacKie said the lowered rate will level the playing field and allow the United States to be competitive with other international businesses.
Capital spending provisions are another key component set to impact the industry. Beginning in 2018, companies will be allowed to immediately deduct the cost of short-lived capital investments such as equipment or facility upgrades. However, this provision will last only five years and then be phased out in the subsequent five years, pushing bakers to enhance operations before it’s too late.
The bill also preserved the R.&D. tax credit that allows companies to write off investments made on developing American-made products.
While the long-term effects of the reform are yet to be seen, the bill provides the industry with a generous start to 2018. With so much room for investment, it is now up to the industry to take advantage of the new breaks, Mr. MacKie noted.
“Coupled with the rollback of the regulatory overreach of the past few years, bakers and their suppliers have more capital and flexibility to modernize facilities, meet new consumer trends and add skilled employees,” Mr. MacKie said. “Now the biggest challenge facing bakers will be finding and training those skilled employees to sustain their growth plans.”
