A Myth About Manufacturing

By August 4, 2010Economy, Taxation

Manufacturers disagree with Treasury Secretary Geithner’s  comments this afternoon at an event sponsored by the Center for American Progress and the American Action Forum in which he stated it is a “myth” that tax increases would hurt small businesses.  Nearly 68 percent of all manufacturers are organized as S-Corporations or other entities taxed at the individual rate. This means they pay individual tax rates on their business income. So, when the Administration says it supports letting the 2001 and 2003 tax cuts expire for the top 2 percent in this country, these manufacturers are included.

Since 2007, these manufacturers organized as S-Corporations have lost more than 850,000 jobs – 42 percent of the total jobs lost in the goods-producing sector.  Increasing taxes would deal a painful blow and create more uncertainty and increase costs for an industry trying to lead our nation in recovery. 

Manufacturers have been hit hard especially as a capital-intensive business.  Manufacturer’s equipment is expensive, they have more employees and higher payroll costs, so the money flowing through their business tends to be higher. Further, the company’s profit does not equal the manufacturer’s take-home pay as they reinvest in their business with new equipment and new employees.  Often it also means building new facilities.

In a March 2010 survey of small and medium-sized manufacturers firms, 86 percent said they were concerned about the expiring tax rates – of those, 62 percent said they were very concerned.  I don’t think these manufacturers would at all agree with Secretary Geithner’s claim that these tax hikes will not have an impact on them.

With unemployment continuing to hover close to 10 percent, we will continue to urge the Administration and Congress to put policies in place that will stimulate private sector growth and jobs – which includes extending the 2001 and 2003 tax cuts.  We also encourage them to enact the policies explained in the NAM’s “Manufacturing Strategy For Jobs and a Competitive America.”

Dorothy Coleman

Dorothy Coleman

Dorothy Coleman is vice president of tax and domestic economic policy at the National Association of Manufacturers (NAM). Ms. Coleman is responsible for providing NAM members with important information related to tax issues and representing the NAM’s position to Congress, the Administration and the media. An NAM spokesperson for tax policy issues, she coordinates membership coalitions; prepares testimony, reports and analyses; and responds to media inquiries. Before taking over as vice president of the tax policy department, she served as director of tax policy from April 1998 to April 2000.
Dorothy Coleman

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