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Midwest states have most to lose if U.S. pulls out of NAFTA

Legislative Watch: Midwest states stand to lose most without NAFTA; tax bill nears finalization; Pork Board members approved; the ag census is in the mail; Congress will be busy this month.

P. Scott Shearer

December 1, 2017

5 Min Read
Midwest states have most to lose if U.S. pulls out of NAFTA

States in the Midwest and border states would be the biggest losers if the United States withdraws from the North American Free Trade Agreement, according to a recent study by the U.S. Chamber of Commerce. This is the result of increased tariffs, lost sales and lost market share. The top five states that would suffer the most are:

1. Michigan — Over 366,000 Michigan jobs depend on trade with Canada and Mexico and 65% of Michigan’s exports go to Canada and Mexico which represents $35 billion. Ninety-five percent of the state’s steel exports are to Canada and Mexico.

2. Wisconsin — 249,000 jobs at risk if the United States withdraws from NAFTA. Canada and Mexico represent 46% of Wisconsin’s exports at a value of $9.6 billion. Without NAFTA cheese tariffs to Mexico would increase to 45%.

3. North Dakota — 33,000 jobs would be at risk. Eighty-four percent of North Dakota’s exports are to Canada and Mexico with a value of $3.5 billion. North Dakota exported nearly $1 billion of wheat last year. If NAFTA ends, Mexican tariffs could increase from zero to 67% on wheat.

4. Texas — 970,000 jobs at risk. 48% of Texas’ exports are to Canada and Mexico worth $112 billion. These countries are key markets for Texas’ motor vehicle parts (92%), plastic products (87%) and computer equipment (83%) exports. Mexican tariffs on beef would increase from zero to 25%.

5. Missouri — 250,000 jobs at risk. Canada and Mexico represent 56% of Missouri’s exports with a value of $7.8 billion. Eighty percent of Missouri’s grain and oilseeds go to Canada and Mexico.

The next top five states losing are Ohio, Iowa, Indiana, Arizona and Nebraska.

Senate moving to finalize tax reform bill
The Senate Republicans are trying to pass their tax bill today. President Trump met with Senate Republicans this week pushing the need to finalize a tax bill by the end of the year. After the Senate passes its bill there will be a conference with the House to work out the differences. The goal is to have a bill on the president’s desk prior to Christmas.

On Nov. 16, the House passed the “Tax Cuts and Jobs Act” by largely a party-line vote of 227-205. Since then, the Senate Republicans unveiled their tax reform legislation and have been working to identify compromises with the House bill while also refining the bill to accommodate concerns of key Republican Senators.

In broad tax policy terms, the House and Senate tax bills aim to achieve the same goals, while sometimes differing slightly on the mechanics. Both plans seek to significantly lower the corporate rate to 20%; however the Senate bill does not enact the lower rate until 2019, while the House bill implements the new corporate rate in 2018. The House and Senate each chose to reduce rates for small businesses and pass-throughs and while each body took a different approach, the net result of each bill is a significantly lower rate for small businesses. Other business items include provisions repealing the corporate AMT, and full expensing on purchases made after Sept. 27, 2017, until Jan. 1, 2023.

On the individual side, the Senate bill keeps seven tax brackets, while the House bill consolidates to four brackets. The House bill keeps the current top rate, while the Senate lowers the top rate slightly to 38.5%. Both bills double the standard deduction for individuals, heads of households and joint filers.

Both bills also include modifications to the child tax credit, which roughly doubles the current $1,000 credit aimed at helping offset the cost of childcare. Mortgage interest deduction is capped at $500,000 in the House bill while the Senate bill retains current law. The House and Senate address the issue of the estate tax differently with the House increasing the exception to $10 million and then repealing the tax entirely after six years, while the Senate doubled the current exemption but did not eliminate the tax.

Finally, each bill repealed the state and local tax deduction, but the House retained the local property tax deduction capped at $10,000.

From a fiscal policy perspective each bill would cost more than $1.4 trillion over 10 years.

USDA names Pork Board members
Secretary of Agriculture Sonny Perdue named five members to serve on the National Pork Board who will serve three-year terms. Those appointed are Brett Kaysen, Nunn, Colo.; Steven R. Rommereim, Alcester, S.D.; Scott Phillips, Drexel, Mo.; Heather Hill, Greenfield, Ind.; and Deb Balance, Fremont, N.C.

2017 ag census in the mail
USDA’s National Agricultural Statistics Service has started mailing the 2017 Census of Agriculture to producers. Farm operations of all sizes which produced and sold $1,000 or more of agricultural product in 2017 are included in the census. Producers will have until Feb. 5 to respond to the census by either online or by mail.

Secretary of Agriculture Sonny Perdue says, “The Census of Agriculture is USDA’s largest data collection endeavor, providing some of the most widely used statistics in the industry. Collected in service to American agriculture since 1840, the census gives every producer the opportunity to be represented so that informed decisions can support their efforts to provide the world with food, fuel, feed and fiber. Every response matters.”

The census takes place every five years.

Busy December Congressional agenda
Congress faces a hectic schedule this month with a number of items to be addressed.

Top of the list is finalizing the tax bill. This is the major priority of President Trump and Congressional Republicans.

The continuing resolution that funds the federal government expires on Dec. 8. If Congress does not finalize the Fiscal Year ’18 appropriations or passes another short-term continuing resolution, the federal government will shut down. It is expected at this time Congress will pass another short-term CR until Dec. 22. In the Senate it will take 60 votes on any spending bill to pass.

There is expected to be another request for additional funds for hurricane relief.

An issue that is closely tied to the debate over government funding is the Deferred Action for Childhood Arrivals program also known as “Dreamers.” Speaker of the House Paul Ryan would like to deal with the issue early next year. However, Democrats want to address the issue this year and are threatening to withhold votes on the FY ’18 government funding. In the past few years it has taken Democratic votes to pass a CR.

About the Author(s)

P. Scott Shearer

Vice President, Bockorny Group, Inc.

Scott Shearer is vice president of the Bockorny Group Inc., a leading bipartisan government affairs consulting firm in Washington, D.C. With more than 30 years experience in government and corporate relations in state and national arenas, he is recognized as a leader in agricultural trade issues, having served as co-chairman of the Agricultural Coalition for U.S.-China Trade and co-chairman of the Agricultural Coalition for Trade Promotion Authority. Scott was instrumental in the passage of China Permanent Normal Trade Relations and TPA. He is past chairman of the USDA-USTR Agricultural Technical Advisory Committee for Trade in Animals and Animal Products and was a member of the USAID Food Security Advisory Committee. Prior to joining the Bockorny Group, Scott served as director of national relations for Farmland Industries Inc., as well as USDA’s Deputy Assistant Secretary for Congressional Affairs (1993-96), serving as liaison for the Secretary of Agriculture and the USDA to Congress.

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