Domestic manufacturing

Domestic manufacturing income

August 18, 2005 | By Keith Martin in Washington, DC

Domestic manufacturing income is taxed more lightly by the US government than other income.

This is to encourage American companies to keep manufacturing jobs at home. Electricity generation is considered “manufacturing,” but transmission or distribution is not. Rather than a lower tax rate, companies are allowed to deduct a portion of their domestic manufacturing income. This has the same effect as reducing the tax rate.

As the NewsWire went to press, 27 states were considered likely to allow the same deduction as at the federal level, and 19 states either already have rejected it or are expected to do so. Among the states expected to follow the US lead are Arizona, Florida, Illinois, Iowa, Kansas, Louisiana, New Mexico, New York, Oregon, Pennsylvania and Virginia. States expected not to allow the deduction include California, Hawaii, Maryland, Minnesota, New Jersey, Texas and West Virginia.