Some manufacturing subindustries might not see the tax savings that the industry as a whole anticipates from the tax law, a new analysis suggests.
EY analysts estimate that the manufacturing industry will owe $36 billion (3 percent) less tax from 2018 to 2027 because of the Tax Cuts and Jobs Act (P.L. 115-97), according to a March 20 report. However, the subindustries of chemical products manufacturing and computer and electronic manufacturing will see net tax increases of $11 billion and $10 billion, respectively, over the same period. That's a 4 percent increase for both subindustries.
The subindustry that EY estimates will see the greatest benefit from the tax law is “other durable manufacturing,” which it predicts will save $48 billion (10 percent) over 10 years. The petroleum and coal products manufacturing subindustry will save $4 billion (3 percent) over that period, and the “other nondurable manufacturing” subindustry will see $6 billion (8 percent) in tax savings, according to the estimates.
The food and beverage products manufacturing subindustry's liability is expected to be effectively unchanged at just $1 billion more from 2018 to 2027 because of the new tax law, according to EY.
Still, manufacturing is not the industry that EY expects will see the greatest tax savings from the new law: EY estimates the services industry will see a decrease in tax liability of $349 billion (16 percent) over 10 years. And the wholesale and retail trade industry is expected to save $283 billion (23 percent).
EY does not expect any overall industry to see an increase in tax liability over the next decade. The report includes a breakdown of which provisions EY estimates will increase companies’ tax liabilities, such as the base erosion and antiabuse tax, and which it estimates will decrease tax liabilities, such as the deduction for qualified business income.
According to the report, EY conducted its analysis using Joint Committee on Taxation and Congressional Budget Office projections, and allocated the JCT estimates “to industries by organizational form through use of publicly available data.”
Follow Zoe Sagalow (@thesagaofzoe) on Twitter for real-time updates.