The Consequences of ‘Revenue Increases’

By March 15, 2007Briefly Legal, Economy

Manufacturers were ably represented Wednesday at a House Ways and Means Committee hearing by Ken Petrini, vice president of taxes at Air Products and Chemicals, Inc., in Allentown, PA. Ken heads the NAM’s Tax and Budget Policy Committee, so he was the right person to testify on the corporate tax increases included in the Senate minimum-wage bill. (NAM news release here.)

“NAM members believe strongly that tax relief is critical to durable economic growth and job creation,” Ken testified. “In contrast, revenue raisers—like those I will describe in my testimony—would impose new taxes on many businesses, making it more difficult for them to compete in the global marketplace.”

Or, as the solid Dow-Jones story summarized the issue, “WASHINGTON (Dow Jones)–U.S. business groups complained Wednesday that an $8.3 billion Senate tax bill would add excessive regulations, harm due process and impede companies’ ability to retain key workers.”

The provisions in question:

  • Deny Deductions for Punitive Damage Payments
  • Deny Deductions for Settlement Payments
  • Limit Deferrals Under Nonqualified Deferred Compensation Plans
  • Expand the Definition of Employees Subject to Rules Limiting the Deduction for Salary Payments
  • , and

  • Impose New Taxes on Expatriates
  • The testimony — available here — enters into technical tax areas beyond our ken, but we certainly understand the bottom line. As the Manufacturing Institute’s updated cost study demonstrated, corporate taxes represent a significant competitive disadvantage for manufacturers in the United States compared to our nine major trading partners. The $8.3 billion in the Senate bill would drag U.S. manufacturers further behind.

    P.S. Chairman Rangel deserves credit for allowing a full and fair discussion of these issues. It was a good hearing.

    UPDATE (1:30 p.m.): From Washington Wire, the Wall Street Journal’s blog, an entry entitled, “House Democrats Befriend Business Groups.”

    “Explain to me how the Senate could have looked at these provisions and said this is good for business,” said Rep. Jim McDermott (D., Wash.). “What in the world did they think they were giving business?…What do they think they were doing?”