John Burke, the president of Trek Bicycle Corp.
The president of North America's largest bicycle manufacturer has slammed President Donald Trump over his corporate-tax reform, failed leadership, and misguided "America First theory."
John Burke, the head of Waterloo, Wisconsin-based Trek Bicycle Corp., lambasted Trump during an interview with Business Insider on Thursday, saying he missed a huge opportunity to simplify a complicated tax system and has failed to lead the country.
"We're 100 days in and he finally comes out with a tax plan - and it was 250 words? And there was no bad news," Burke said. "Here's this huge opportunity to simplify everything and to have massive change, and you get 250 words."
While Trump's tax plan contains broad outlines rather than firm legislative text, Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn said the plan would include "the biggest tax cut" in US history, echoing statements made by Trump.
Trek, a family-owned company, was cofounded by Richard Burke, John's father, in a Waterloo barn in 1976. Today it is a global bike business worth over $1 billion, and it employs 2,000 people worldwide. It makes a variety of bikes, including kids' bikes, mountain bikes, and high-end road bikes. It also owns the Trek-Segafredo team that competes in the Tour de France.
Burke, who says he is neither a Republican nor a Democrat but an independent, is the author of "12 Simple Solutions to Save America," published in 2016, which "challenges Americans to resist the status quo and change what elected officials are unwilling or unable to change."
Daniel McMahon/Business Insider
Trek Bicycle Corp. headquarters in Waterloo, Wisconsin.
"Look, I don't need a tax break - Trek doesn't need a tax break," Burke told Business Insider. "We're going to succeed and fail in the market based on how good our products are and how good our services are. As a member of the community, we have a moral duty to be a good corporate citizen, and one way you're a good corporate citizen is you pay your taxes."
Burke added that, from a competitive standpoint, American corporate taxes should come down - but so should all the deductions. And while he did praise Trump for reducing the number of tax brackets, he criticized him for not getting rid of corporate deductions altogether.
"You have General Electric, a great American company, which made a profit of $12 billion. They filed a 57,000-page tax return and paid zero in taxes.
"So if you want to reduce corporate taxes, that's fine, reduce them," Burke went on, "but Trump wants to reduce them from 35% to 15%, and I think that's too big a decline. But then he doesn't want to get rid of any of the deductions?
"Why do oil companies get deductions and bicycle companies don't? Why do certain industries get deductions and shoemakers don't? The brewer doesn't get a deduction. It doesn't make sense. You're leaving in place this super-complicated tax system.
"So it's treats for everybody. For corporate America, you get a lower rate, and you get to keep your deductions. And for all the individual taxpayers, you get a lower rate.
"We're 19 trillion frickin dollars in debt and everybody got a treat. And I just go, 'You're kidding me.' You call that leadership? I don't."
On misguided 'America First theory'
Burke also criticized Trump on his leadership of the country.
"When you're the president of the United States and you come out with this 'American First' theory, what are you saying to the rest of the world?
"I've been so fortunate here in growing the business. When I started here, we were doing $16 million and now we do over a billion dollars, and I've worked with an incredible team to do that. We took the business from just being in the US to right now - 60% of our business is around the world.
Daniel McMahon/Business Insider
A Tour de France-worthy $13,000 Trek Madone Race Shop Limited on display at Trek headquarters in Waterloo, Wisconsin. Cycling Weekly recently named it the fastest aero road bike.
"And one of the reasons why American is as strong as it is, is there are a lot of great American companies who have access to markets all around the world - General Electric, Coca-Cola, Apple, Trek, Harley-Davidson.
"The whole 'American First' thing ... I just don't find that conducive to America's future or anyone else in the world."
Lack of leadership
"The best definition I ever heard of leadership is, leadership is the ability to make the dream a reality at the grassroots level," Burke added. "But leadership is also, "Here's the vision, and I'm going to convince people where we need to go." And what we've come to in American politics is saying, 'Well, I need to get elected, so I'm going to tell all these people whatever they want to hear.'
"You know, if you're the richest person on the playground and you're the biggest person on the playground ... you know, we usually lead like, 'Talk softly and carry a big stick,' and when we're walking around with a blow horn, that's not the way we roll.
"We're a leader in the world, but to maintain that status over the long haul, you actually need a leader who can look at the people and say, 'You know, we've got problems here' - and whether your talking about tax codes, gun control, nuclear proliferation, big issues - 'Here are the problems, and here are the solutions, and this is why we need to do it.'
"And more than just a sound bite, we've got to educate people and say, 'This is why we need to move here.' And I think we lack that right now, and I think we've lacked it for a while."
Thomson Reuters
President Trump.
Trump once sponsored the biggest bicycle race in America - the Tour de Trump - which ran for two years, 1989-1990, before being taken over by DuPont.
Trump's proposal did not include a large number of key details, including the income levels associated with a new three-bracket tax system, the tax rate for a one-time repatriation of corporate profits held overseas, and others.
Here are the key points of the Trump plan:
- Corporate tax rate of 15%: Such a rate would deliver on Trump's campaign promise. The current federal statutory rate is 35%.
- Allows pass-through rate for business owners: Instead of self-owned businesses being taxed at the personal income rate, business owners would have incomes from operations taxed at the 15% rate. So if you own your own business, income from that business would be taxed at the corporate rate. According to The New York Times, that could apply to the Trump Organization.
- No border-adjustment tax: The tax on imports was favored by House GOP leaders such as Speaker Paul Ryan and Kevin Brady, the chair of the Ways and Means Committee. Mnuchin said the White House talked to Ryan and Brady but thought the tax did not "work in its current form."
- A slight adjustment to individual tax rates: White House officials said there would be three tax brackets with rates of 35%, 25%, and 10%, down from the current seven brackets. Cohn told reporters that he did not have the exact incomes associated with the brackets.
- Doubling of the standard individual tax deduction: This would allow individual filers to deduct their first $12,700 in income from their taxes and $25,400 for joint filers, as opposed to the current $6,350 for individuals and $12,700 for joint filers.
- A one-time repatriation tax: This would allow companies to bring back money from overseas to the US with a slightly lower, one-time tax. The White House did not clarify the rate at which this money would be taxed. President George W. Bush enacted a repatriation tax at a 5.25% rate in 2004, but studies show the money brought back mostly went to stock buybacks and dividends rather than hiring workers.
- Elimination of the estate tax: This would eliminate a tax on assets being transferred through a will.
- Elimination of itemized tax deductions other than charitable donations and mortgage payments: Mnuchin said this provision would close "loopholes" and offset the decrease in base tax rate for high income Americans.
- Repeal a 3.8% tax on net investment income: The tax was levied on "individuals, estates and trusts" with higher than a certain threshold in investment income. For instance, the threshold for an individual was $200,000 in investment income last year.
- Repeal the alternative minimum tax: This tax requires some people who have large numbers of deductions to calculate their income tax under the normal tax rate and the alternative and pay the higher amount. According to the Tax Policy Center, the tax was originally designed to eliminate large deductions by wealthier people, but now applies to about 5 million people.
- No infrastructure spending: Reports on Tuesday said Trump was considering including infrastructure spending in the plan to try to win over Democrats. Mnuchin denied the report in the speech, saying the proposal would be "just a tax plan."
You can listen to Burke discussing "12 Simple Solutions to Save America" in 2016 below:
Bob Ryan contributed reporting.