*photo courtesy: Cleveland-Bolivar Chamber of Commerce
MMA President & CEO John McKay was a guest speaker at a Cleveland-Bolivar County Chamber of Commerce event Monday night.
In his speech, McKay gave an overview of the state of manufacturing. He discussed how an essential component to our recovery from COVID is how manufacturers never stopped production of critical supplies, such as personal protective equipment (PPE), testing supplies, household goods (cleaners, toilet patper, etc.), and most importantly, a safe an effective vaccine.
He also highlighted the fact that many manufacturers in the furniture, lumber, wood, appliance, and heavy equipment industries are having record years.
McKay mentioned that manufacturing remains one of the highest-paying industries in Mississippi, and it produces nearly a 3-times multiplier of economic impact on the communities in which they are located.
However, he also acknowledged how not everything is positive.
The manufacturing industry faces many challenges, especially with the workforce. Mississippi’s stagnant population growth, combined with a misalignment of skills and education and generous federal benefits, are making it hard for companies to find qualified employees.
Supply chain disruptions are also impacting production. These disruptions include raw materials and components, like microchips, metals, and plastics. In turn, these delays are causing an increase in prices. Those price increases are especially noticeable with transportation. For example, the price of shipping containers has increased 5-fold.
All of this leads to inflationary pressures that ultimately increase costs of production. Most of these cost increases have yet to be fully factored into products and will be impacting consumers well into 2022.
McKay mentioned he recently testified before a Tax Study Committee at the State Capitol. There, he spoke on the importance of simplicity, fairness, and predictability when it comes to tax policy. MMA’s agenda over the past decade has been to identify and attempt to address taxes that put Mississippi at a competitive disadvantage. He discussed some changes MMA has advocated, which are:
– Inventory Tax – Local tax that is still assessed and collected at the local level; Businesses apply for a credit against income tax liability; Roughly a quarter ($20-30M) in credits issued each year from the approx. $140M collected at local level
– Franchise Tax – Tax on capital deployed in the state; assessed regardless of profitability; currently in year 4 of 10-year phase out of this tax. ($240M total)
– Sales Tax on Energy Used in Manufacturing – Exempted the 1.5% sales tax on energy for manufacturing process.
All of these are costs that are not incurred by manufacturers in most other states. As state legislators continue to discuss the elimination of the state income tax, McKay shared some of his concerns with the House proposal, which includes:
– A tax hike on manufacturing equipment and replacement parts
– General sales tax rate increase to 9.5 percent
– Decoupling the Corporate & Individual Income Tax
– Treating business income differently
– Economic development incentives based on withholdings