United Technologies CEO: We're creating 35,000 US jobs thanks to tax reform bill

The crumbs from the tax reform bill continue to pile up. United Technologies announced today that they will take advantage of changes in the tax law passed in December to invest $15 billion in the US, repatriating cash from overseas to create 35,000 jobs over the next five years. The move comes as some questioned a transfer of jobs from one of its units that got a lot of attention during the 2016 election, Forbes’ Loren Thompson notes:

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United Technologies disclosed today that it expects to hire 35,000 employees in the United States over the next five years, a number equivalent to half of its current domestic employment. The Connecticut-based maker of aerospace systems and commercial building technology (like Otis elevators) also disclosed it expects to spend $15 billion in the U.S. during the same period on capital investments and research.

The twin announcements appear aimed at correcting an impression fostered by controversy over the transfer of some jobs at its Carrier division that it is shifting manufacturing outside the United States. According to a press release, the company is growing faster in the U.S. than overseas, and in the last three years has created more jobs domestically than in all foreign locations combined. A third of the company’s 200,000 employees are in the U.S.

Most of the new hires will be replacements of retiring or departing employees, but there will be a net increase of “several thousand” domestic jobs, mainly in response to surging demand for the company’s aircraft engines and other aerospace products. United Technologies, a contributor to my think tank, will see revenues grow to $67-68 billion this year following assimilation of Rockwell Collins, an aerospace and electronics firm whose acquisition was revealed last year.

Thompson offers a fairly detailed analysis of the move, one well worth reading, but also missing one component. That’s the incentive for the move, which the company spelled out explicitly in its press release:

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The competitive tax system resulting from U.S. tax reform is encouraging global companies, such as United Technologies, to make long-term investments in innovation in America.

United Technologies anticipates investing $15 billion in R&D and CapEx projects in the U.S. over the next five years. About $9 billion of that investment is expected to go towards R&D that will include initiatives to accelerate the firm’s digital strategy. The strategy is focused on transforming service capabilities, improving the customer experience with intelligent products, driving optimization through smart factory adoption, and developing connected products that enable real-time health monitoring capabilities. It will also include work on next-generation additive manufacturing, artificial intelligence and autonomy, hybrid-electric, cybersecurity and the advancement of high-temperature materials.

The remaining $6 billion is expected to go towards CapEx initiatives that will drive innovation across existing U.S. manufacturing facilities to increase capacity and improve quality and efficiency.

Reuters did pick it up, mentioning the comment in its lead, but not providing much in deeper analysis, either political or economic. The Associated Press missed it, and CNN hadn’t bothered to report the story at all by noon today. Why not, and why did UTX go out of its way to credit the tax bill? Perhaps the most recent effort from Democrats to roll it back explains both. Chuck Schumer and Nancy Pelosi announced a plan to spend $100 billion on schools over the next decade, money financed by … well, you know:

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On Tuesday, Democratic leaders in the House and Senate made a bold promise: They will raise taxes on the rich to give teachers a raise. They just need voters to put them in control of Congress in November.

Senate Minority Leader Chuck Schumer and House Minority Leader Nancy Pelosi announced the new plan, which would give $50 billion to states and school districts over 10 years to pay for teacher raises and recruitment efforts. It would also create a new $50 billion fund for school infrastructure and resources, like new desks and books. …

Democrats say they have an obvious plan to pay for the $100 billion in new funding for teachers and schools: They want to reverse some of the GOP’s tax cuts for the richest Americans.

“Paying for this is simple: revisit the Trump tax cuts for the top 1 percent. Instead of allowing millionaires, billionaires, and massive corporations to keep their tax breaks and special-interest loopholes, Democrats would invest in teachers and students,” the plan states.

The announcement makes two political arguments. As Thompson points out at Forbes, it alleviates a political headache over the job transfers at Carrier. UTX will add lots more jobs over the next several years, so it matters less whether a smaller number get shifted out the US — at least to people outside of Indiana and the families of those who jobs are moving, of course. Those dislocations will still generate negative media coverage, but will exist in the context of a much broader expansion of US employment.

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Much more important, though, is the reminder to voters that these changes really did have their desired impact, and resulted in more than “crumbs” to American working families. The changes in repatriation rules and especially in lowering the corporate tax rate to a level competitive with the rest of the world incentivizes US companies to stay in the US. Remove those incentives, and watch that reverse itself tout suite. Not only will the jobs dissipate, but all those tax revenues on which Democrats count for their own purposes will also evaporate along with the domestic investments.

In other words, the outlook for American working families under Democratic control of Congress would be distinctly … crumb-y. Even if news outlets aren’t keen to connect those dots, expect the GOP to make it crystal clear over the next five months to the midterms.

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David Strom 3:20 PM | November 15, 2024
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David Strom 12:40 PM | November 15, 2024
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