Washington Needs an Education in What Works for Manufacturers

By July 26, 2012Taxation

This is the fourth in a week-long series of posts highlighting  manufacturers’ accounts of how they will be impacted by the impending tax increases. The first three posts can be found here, here and here.

ACE Clearwater, built by the sweat equity and visionary entrepreneurship of three generations, captures the spirit of the American small business. Still family-owned and now operated by Kellie Johnson, the company was founded in 1949 by her grandfather who moved from Oklahoma to Southern California and set up a small welding shop. As he built connections within the community, he and his son-in-law expanded far beyond the small welding repair business he had envisioned. Click here to view a photo essay of ACE Clearwater’s facilities. Kellie took over the business in 1990 and has led ACE Clearwater into the 21st century as a prominent leader in the aerospace industry, employing 200 people in 3 different Southern California locations. Yet the hard work and effort she and her family have put into their company are under direct threat.

ACE Clearwater, an S-Corp that pays their taxes at the individual rate, is set to operate with a tax burden over 50% in 2013. With the massive tax hikes on the way from Washington, California taxes, and other expiring tax provisions, Kellie will be facing some very tough decisions in the near future. Adding insult to injury, ACE Clearwater will be hit doubly hard by the fiscal cliff because of the significant defense cuts set to take effect because of sequestration. Business is already slowing down and they are below their targeted earnings for this year – and the uncertainty of what, if any, action Washington might take is only compounding the problem.

Kellie has invested millions of dollars into her company through equipment purchases, facility upgrades, and workforce training and development. Countless other manufacturers have done the same – but the negative business environment has put all of that at risk. She is as frustrated as you might expect. “We’re going to do all we can to avoid layoffs – we’ve invested so much in our highly skilled workforce and we know that we won’t be able to get those people back.”

“Washington needs to understand that manufacturers in the supply chain won’t be able to just flip a switch and go back to where we were six months ago. Manufacturers provide jobs and products that strengthen the quality of life, protect our nation, and offer innovation that has changed the world we live in for the better. If these tax increases and defense cuts go into effect that innovation will disappear.”

ACE Clearwater benefits from three generations of experience in knowing what works best for manufacturers. They know best what makes them competitive and according to Kellie, “Washington needs an education in what works. We need to be able to invest in our company and with a huge tax burden, it makes that an increasing difficult proposition.”

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