Manufacturers: Derailing the Sequester Only Solves Part of the Problem

By October 23, 2012Taxation

President Obama’s assertion last night that the sequester “will not happen,” was encouraging news to manufacturers who are extremely concerned about the impact on jobs and the economy of the $1.2 trillion in federal spending set to begin January 1st. Although the administration walked back the comments a bit following the debate, it is still an important commitment that we hope the President will uphold.

Earlier this year, we released a report showing that the defense cuts will reduce U.S. employment by more than 1 million jobs in 2014 alone. Similarly, the Information Technology and Innovation Foundation (ITIF), a non-partisan think tank, in September released a study called Eroding Our Foundation: Sequestration, R&D, Innovation and U.S. Economic Growth concluded that close to 200,000 jobs per year could be in jeopardy if across the board cuts to federal R&D investment are implemented. But avoiding the sequester addresses only part of the problem. Pending tax increases for a wide range of individual taxpayers and small businesses along with the spending cuts under sequestration will hit the U.S. economy with a $500 billion fiscal shock on January 1st, a shock that likely will send our already weakened economy into a tailspin.

So, while manufacturers appreciate the President’s commitment to avoiding the sequester, we also believe it is critically important to maintain the status quo on current tax policy for all Americans. Almost 70 percent of all manufacturers (about 200,000 nationwide) pay income taxes at the individual rate. The average taxable income for these small manufacturers is $570,000 – so unless Congress extends current tax rates, these employers will be subject to new tax rates of almost 40 percent and subject to new restrictions on itemized deductions and exemptions. Not exactly good news for job creation and investment.

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

Leave a Reply