Report on the Economic and Sustainable Development Implications of Proposed Tax Legislation

A hearing by the Ways and Means Committee at the Ronald Reagan Presidential Library examined new tax legislation and its potential impact on key sectors of the U.S. economy. Testimonies from small business owners, manufacturers, and agricultural producers were presented to assess how permanent tax policies could align with and advance several United Nations Sustainable Development Goals (SDGs), particularly those related to economic vitality and social equity.

Fostering Decent Work and Economic Growth (SDG 8)

The central theme of the hearing was the legislation’s potential to stimulate robust economic activity and create high-quality employment, directly addressing the core tenets of SDG 8. Witnesses argued that tax certainty would unlock investment and expansion.

Key Provisions for Economic Stimulation:

• Permanent Small Business Deduction: A permanent 20 percent tax deduction for nearly 30 million small businesses is intended to provide the capital for expansion. Raymond Huff, a convenience store owner, testified that such provisions would enable him to double the size of a store, reopen closed locations, and increase his workforce by over 50 percent.
• Pro-Worker Tax Relief: The framework includes targeted relief for workers, such as eliminating taxes on tips and overtime pay. William Fulton, a helicopter manufacturer, stated that these benefits directly impact his workforce and improve their financial well-being.
• Investment and Wage Growth: Proponents argued that the policies would replicate the post-2017 tax cut environment, which saw real wage growth and a rise in household income, contributing to the goal of achieving full and productive employment for all.

Advancing Industry, Innovation, and Infrastructure (SDG 9)

A significant portion of the testimony focused on strengthening the U.S. industrial base and fostering innovation, which is central to SDG 9. The legislation aims to create a competitive environment for domestic manufacturing and research.

Mechanisms for Industrial and Innovation Growth:

1. Immediate R&D Expensing: To counter the competitive advantage of nations like China, which offers a 200 percent R&D tax credit, the legislation restores immediate and full deductibility for R&D expenses. Jay Timmons of the National Association of Manufacturers emphasized that this is critical for spurring innovation and preventing a domestic “R&D recession.”
2. Full Expensing for Facilities: The bill introduces 100 percent expensing for new factories and production facilities, an incentive designed to modernize and expand America’s industrial infrastructure.
3. Supply Chain Resilience: By encouraging domestic investment, the policies aim to build more predictable and resilient American-based supply chains, a key component of sustainable industrialization. William Fulton noted that tax certainty allows his suppliers to grow, strengthening the entire domestic manufacturing ecosystem.

Supporting Sustainable Agriculture and Reducing Poverty (SDG 2 & SDG 1)

The legislation’s impact on family-owned enterprises, particularly in the agricultural sector, was highlighted as a pathway to achieving goals related to food security and poverty reduction.

Measures for Agricultural Sustainability and Social Equity:

• Permanent Estate Tax Exemption (SDG 2): The bill makes the doubled “Death Tax” exemption permanent and indexes it to inflation. California cattle rancher Kevin Kester testified that this certainty is “hugely important” for the continuity of multi-generational family farms. By reducing the financial burden of succession, the policy supports the viability of small-scale food producers, a target of SDG 2.
• Poverty Reduction through Economic Empowerment (SDG 1): The hearing linked the proposed pro-growth tax policies to poverty reduction. It was noted that after the 2017 tax cuts, poverty fell to historic lows. The framework aims to build on this by increasing real wages and creating employment opportunities, thereby addressing SDG 1.

Enhancing Fiscal Health and Reducing Inequalities (SDG 10 & SDG 17)

The report also considered the long-term fiscal implications and the legislation’s role in creating a more equitable economic landscape.

Framework for Fiscal and Social Balance:

• Deficit Reduction through Growth: Dr. Josh Rauh of the Hoover Institution testified that a plausible economic growth rate of 2.5 percent, spurred by the legislation, could reduce deficits by $2 trillion over a decade, contributing to sustainable fiscal management.
• Empowering Small Businesses (SDG 10): By providing permanent tax relief, the framework aims to help small businesses compete more effectively with large corporations. Raymond Huff argued that tax certainty “matters more for small businesses than they do for larger competitors,” thereby helping to reduce economic inequalities.
• Multi-Stakeholder Partnerships (SDG 17): The hearing itself served as a platform for dialogue between policymakers and private sector stakeholders from diverse industries, embodying the collaborative approach essential for achieving the SDGs.

Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 1: No Poverty

  The article connects the proposed tax policies to poverty reduction, stating that after similar tax cuts in 2017, “poverty fell to historic lows.” The implication is that the new bill will continue or enhance this trend by boosting incomes and creating jobs, thereby lifting people out of poverty.

• SDG 8: Decent Work and Economic Growth

  This is the most central SDG in the article. The entire premise of “The One, Big, Beautiful Bill” is to stimulate the economy and create jobs. The article repeatedly mentions goals like achieving an “economic boom,” helping businesses “expand their business and create good-paying jobs,” and increasing “real wages for workers.” It focuses on small businesses, manufacturers, and farmers as engines for this growth.

• SDG 9: Industry, Innovation, and Infrastructure

  The article highlights specific provisions aimed at bolstering the industrial and manufacturing sectors. It mentions “100 percent expensing for factories and production facilities” to “drive manufacturing growth here in the United States.” Furthermore, it emphasizes the importance of immediate expensing for “research and development (R&D)” to “spur new innovations” and enhance competitiveness, particularly against China.

• SDG 10: Reduced Inequalities

  The article suggests that the tax policies will reduce income inequality. It claims that following the 2017 tax cuts, “Incomes for the bottom 10 percent rose 50 percent faster than those in the top 10 percent.” This is presented as evidence that the pro-growth policies benefit lower-income workers disproportionately, thereby narrowing the income gap.

What specific targets under those SDGs can be identified based on the article’s content?

• Target 1.2: Reduce poverty in all its dimensions

  The article directly addresses this target by stating that previous, similar policies led to poverty falling to “historic lows.” The new bill is intended to build on that success, aiming to reduce the proportion of people living in poverty through economic expansion.

• Target 8.1: Sustain per capita economic growth

  The article is focused on achieving sustained economic growth. It explicitly mentions a projected “Economic growth of 2.8 percent” and a plausible outcome of “annual growth to 2.5% per year,” which it argues will lead to deficit reduction and prosperity.

• Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading and innovation

  This target is addressed through the emphasis on R&D. The bill’s provision for “immediate expensing for research and development (R&D)” is designed to “spur new innovations and increased productivity” and reverse an “R&D recession underway in America.”

• Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation

  The article is a showcase for this target. The tax bill itself is the “development-oriented policy.” It supports small businesses like a “California cattle rancher, convenience store owner, and helicopter manufacturer” and is explicitly designed to encourage them to “expand their operations, hire new workers, and raise wages.”

• Target 9.2: Promote inclusive and sustainable industrialization

  The goal to “further drive manufacturing growth here in the United States” and prevent the loss of “1 million manufacturing jobs” directly aligns with raising industry’s share of employment and GDP.

• Target 9.5: Enhance scientific research and upgrade technological capabilities

  The article’s focus on R&D expensing is a direct response to this target. It highlights the need to compete with China’s “200 percent research and development tax credit” and argues the bill will “strengthen American manufacturers, stop the R&D recession… and spur new innovations.”

• Target 10.1: Sustain income growth of the bottom 40 percent of the population

  The article directly references this target by claiming that after the 2017 tax cuts, “Incomes for the bottom 10 percent rose 50 percent faster than those in the top 10 percent,” suggesting the policies are designed to ensure income growth for lower earners outpaces that of top earners.

Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Indicator 1.2.1: Proportion of population living below the national poverty line

  This is directly implied by the statement that after the 2017 tax cuts, “poverty fell to historic lows.” Measuring the national poverty rate would be the key indicator to track the success of this goal.

• Indicator 8.1.1: Annual growth rate of real GDP per capita

  The article explicitly uses this indicator, citing projections of “Economic growth of 2.8 percent” and “annual growth to 2.5% per year” as key outcomes of the tax bill.

• Indicator 8.5.1: Average hourly earnings of employees

  This is referenced when the article states that after the 2017 cuts, “real wages for workers grew almost five percent” and “real income grew $6,000 per family.” Tracking real wage and income growth is a primary measure of the bill’s success for workers.

• Indicator 8.5.2: Unemployment rate

  While not stating a rate, the article implies a focus on this indicator by mentioning the creation of “5 million new jobs” after the 2017 cuts and quoting a business owner who expects to “increase my employee numbers by 50 percent or more.” Job creation numbers are a direct measure of progress.

• Indicator 9.2.1: Manufacturing value added as a proportion of GDP

  The goal to “drive manufacturing growth” and create manufacturing jobs implies a focus on increasing the manufacturing sector’s contribution to the overall economy, which is what this indicator measures.

• Indicator 9.5.1: Research and development expenditure as a proportion of GDP

  The article’s concern about a “reduction in investments in research and development” and the need to incentivize R&D spending directly points to this indicator as a measure of success in fostering innovation.

• Indicator 10.1.1: Growth rates of household income per capita among the bottom 40 per cent of the population

  The specific claim that “Incomes for the bottom 10 percent rose 50 percent faster than those in the top 10 percent” is a direct, albeit differently sliced, version of this indicator. It shows a focus on tracking income growth by quintile to measure progress on reducing inequality.

Table of SDGs, Targets, and Indicators

Source: waysandmeans.house.gov