Restating the Obvious

By March 10, 2014Taxation

The release today of NAM/IndustryWeek Survey of Manufacturers confirms what manufacturers have long known, the expiration of the on-again and off-again investment tax incentives have companies holding off on making key purchases and thus delays the robust economic growth we need. According to the survey, the expiration of two of the key incentives for manufacturers, the “enhanced” Section 179 expensing and the so-called “bonus depreciation,” forces many manufacturers to rethink with investment plans. The enhanced Section 179 allowed smaller companies to write off up to $500,000 of capital equipment immediately if they invest less than $2 million a year and the so-called “bonus depreciation”— available to companies of all sizes — allowed taxpayers to expense 50 percent of the cost of assets bought and placed into service in 2013.

The survey found that 64.4 percent of manufacturers (three-quarters of medium-sized firms with between 50 and 499 employees) said they took advantage Sec. 179 and/or bonus depreciation in 2012 or 2013, or. “(R)oughly 40% of small and medium-sized manufacturers felt that the expiration of these provisions would alter their company’s investment plans for this year.”  As we’ve long maintained, manufacturers use these tax provisions to replace old or out-of-date equipment (73.9%), add capacity for existing product lines (56.7%) and add new capacity for additional products (50.2%). And in rebuttal to those who think that the impact of Section 179 is limited to small businesses, respondents also confirmed what the NAM has long known, that “they sold capital equipment, and Section 179 was an effective sales tool for them.”

Today much of the focus over tax policy is centered squarely on the need and various proposals for comprehensive tax reform. Indeed, the NAM has long called for comprehensive reform however in the meantime while policymakers work through the process of arriving at this much needed overhaul, manufacturers need these critical incentives extended now, not resurrected during the Congress’s final hours in December. Once again, this survey finds that government created barriers continue to hold back a full and robust economic recovery finding that, “(a)ll told, 79 percent of respondents said there is an unfavorable business climate because of taxes, regulations and government uncertainties.”

The tax extenders package, which includes Sec. 179 and bonus depreciation, is a poster child for the drag that uncertainty has on the economy. Let’s hope that the Congress acts quickly to reinstate these provisions and keeps them in effect until we can get to a newly reformed system which will really allow the economy to take off and grow.

Carolyn Lee

Carolyn Lee

Executive Director of The Manufacturing Institute at The Manufacturing Institute
Carolyn Lee is Executive Director of The Manufacturing Institute, the non-profit affiliate of the National Association of Manufacturers (NAM), the nation’s largest industrial trade association. Carolyn drives an agenda focused on improving the manufacturing industry through its three centers: the Center for the American Workforce, the Center for Manufacturing Research, and the Center for Best Practices.

In her role, Carolyn leads the Institute’s workforce efforts to close the skills gap and inspire all Americans to enter the U.S. manufacturing workforce, focusing on women, youth, and veterans. Carolyn steers the Institute’s initiatives and programs to educate the public on manufacturing careers, improve the quality of manufacturing education, engage, develop and retain key members of the workforce, and identify and document best practices. In addition, Carolyn drives the agenda for the Center for Manufacturing Research, which partners with leading consulting firms in the country. The Institute studies the critical issues facing manufacturing and then applies that research to develop and identify solutions that are implemented by companies, schools, governments, and organizations across the country.

Prior to joining the Institute, Carolyn was Senior Director of Tax Policy at the NAM beginning in 2011, where she was responsible for key portions of the NAM’s tax portfolio representing the manufacturing community on Capitol Hill and in the business community and working closely with the NAM membership. She served as the Director of Legislative and Government Affairs at the Telecommunications Industry Association, Manager of State and Federal Government Affairs for 3M Company, and in various positions on Capitol Hill including as Legislative Director for former U.S. Senator Olympia Snowe (R-ME), and as a senior legislative staff member for former U.S. Rep. Sue Kelly (R-NY).

Carolyn is a graduate of Gettysburg College in Gettysburg, Pennsylvania graduating with a B.A. in Political Science. She resides in Northern Virginia with her husband and three children.
Carolyn Lee

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