On Friday, November 14th, the NAM wrapped up “Investment Week” with a Shopfloor Hill briefing held in the Rayburn House Office Building which focused on the importance of the investment tax incentives that are currently part of the “tax extenders” debate. (continue reading…)
Throughout “Investment Week” we are seeking to highlight the impact of these provisions on manufacturers large and small. Today, we want to highlight the ripple-effect that enhanced Section 179 has in the larger economy. This provision is helpful for manufacturers that are investing and for the manufacturers of capital equipment.
A good example of this synergy is Green River Cabins, LLC a manufacturer of RV Park Models and Modular Cabins, in Campobello, South Carolina. According to Company President, Dean Garritson, “as a small manufacturer, enhanced Section 179 has significant impact on our decision to upgrade or add equipment. Additionally, because the RV Park Models are personal property, when used in a business, these purchases are often eligible for Section 179.”
In fact, about 15 percent of Green River Cabins’ park model sales are sold to businesses that rent these units for nightly and weekly getaways. Over the years business owners tend to add units each year and enhanced Section 179 is critical to their decision to buy the units. So this provision is not only beneficial to Green River Cabins and helps grow their own business and sales and their whole supply chain but it is also beneficial to the business that is purchasing the cabins and their employees and supply chains as well.
According to Dean, “in short, our business uses section 179 to reduce the cost of capital equipment and to sell our product. We are one of many manufacturers that sell capital equipment and the positive impact of section 179 to our cash flow and sales helps to offset the increasing cost of government regulation.”
This is just one example of the ripple-effect that can be expanded with the permanent extension of enhanced Section 179 expensing. Manufacturers large and small call on the Congress to take action and renew and extend these provisions.
Since 1948, Unverferth Manufacturing has been working to improve and serve America’s farm operations. From humble beginnings as a company begun by a son and his father in their family’s barn manufacturing and marketing dual and triple wheel systems and components, Unverferth today is a leading manufacturer and marketer of tillage equipment, pull-type sprayers, grain carts and grain wagons, and agricultural dual and specialty wheels. Today the company has three manufacturing facilities: two in Ohio and one in Iowa and eight sales branches across North America. (continue reading…)
As part of “Investment Week” we want to highlight the role that pro-investment tax policy plays in the success of our nation’s manufacturing sector. These provisions are used by manufacturers large and small and are a particularly high priority for small and medium-sized manufacturers. In order to compete in a worldwide economy, manufacturers need to plan and invest and meet emerging needs. Extension of the pro-growth policies that expired at the end of 2013 would amount to a major step towards a tax code that will promote investment. (continue reading…)
The NAM has long advocated for pro-investment tax policies including investment incentives like enhanced Section 179 expensing, 50 percent first year expensing also known as “bonus depreciation” and provisions that allow companies to accelerate the use of AMT credits in lieu of bonus. (continue reading…)
This week the National Association of Manufacturers (NAM) is sponsoring “Investment Week” to highlight the critical role that capital investment plays in a competitive manufacturing sector.
While the country has officially come out of the Great Recession, economic growth is anemic and the economy isn’t where it should be. (continue reading…)
Yesterday the Center for American Progress released a report, “The Growing Consensus to Improve Our Tax Code” which “discusses some aspects of good tax policy that are endorsed on both sides and then identifies specific proposals for which consensus appears to be within reach.” While the NAM has long argued for comprehensive tax reform and is open to any and all efforts to find common-ground between both political parties as well as between the Congress and the Administration to achieve this critical goal, we take issue with the idea that the proposals included in this report is the common-ground that “could be implemented individually or as part of a package to advance other pressing economic priorities.”
This report, which simply identifies commonalities between the Administration budget proposals and base-broadening included in House Ways and Means Chairman Dave Camp’s “Tax Reform Act of 2014” discussion draft, ignores the underpinnings of both frameworks—lower tax rates in exchange for base-broadening. The report doesn’t however touch on the harm that would come from eliminating any or all of the “consensus” provisions absent a significant reduction in the corporate tax rate, or a shift to a competitive international tax system.
The reality is, comprehensive tax reform is essential to putting our still lagging economy on the fast-track to growth. There is broad agreement that our tax code is antiquated, uncompetitive and burdensome. However, there is not consensus on the the idea of using the revenues raised from base-broadening for any purpose other than reforming the tax code. Indeed, there are other points of consensus between the various tax reform proposals that have been floated in past years and that consensus should be used as the basis of a real effort to reform our tax code, not as a piggy bank for other ideas.
We were pleased to see the Senate Finance Committee on September 17th continuing to lay the foundation for comprehensive tax reform with a hearing entitled, “Reforming America’s Outdated Energy Tax Code.” Manufacturers are heartened by the focus on this critical part of the manufacturing –and national –economy since we consume more than 1/3 of the nation’s energy. At the same time, as we outlined in our statement for the Committee Record, we remain concerned about the misplaced emphasis on changes that would move the tax code away from encouraging capital investment and towards penalizing the sources of production that are not only leading to an energy boom in our nation but also putting the U.S. on track towards being energy self-reliant. The recent jump in domestic energy production has been a boon to our economy and has helped drive down costs for domestic manufacturers and making us more competitive.
It is critical that policy makers keep in mind that the amount of capital investment required to make our domestic reserves into domestic production is enormous and cost-recovery provisions in the tax code matters. The NAM has long called for comprehensive tax reform to include a robust capital cost recovery system. Some dismiss the importance of these provisions as simply a matter of timing, however when access to capital is tight and capital is limited, the ability to quickly recover investment costs is critical and allows companies to engage in additional projects sooner. These are the very types of provisions that enacted as part of pro-growth, pro-manufacturing, pro-job, comprehensive tax reform will help unleash the growth that our economy needs and help achieve the NAM’s goal of making the U.S. the best place in the world in which to manufacture.
While many press stories today focused on what U.S. Treasury Secretary Lew said – and did not say – on business tax reform and the so-called “inversions” this morning at the Urban institute, the media missed the boat by not focusing more attention on a panel discussion after Secretary’s Lew speech .
Indeed, John Samuels, Vice President and Senior Counsel of Tax Policy and Planning at the General Electric Company, raised perhaps the most important and most often missed point in this whole discussion when he asked why policy makers are discussing how to raise the bar and make it harder for companies to leave the United States when they should be focusing on what we need to do to make it more attractive for companies (aka employers) to be located in the United States.
This is exactly the question that manufacturers have been asking themselves for quite some time. One of the NAM’s top goals is to make the United States the best place in the world to manufacture and attract foreign direct investment—a goal on which almost everyone should be able to agree but one that policymakers have done so little to advance. We have known that our tax code was antiquated, non-competitive and perhaps worst of all, unpredictable, for decades. Our tax system is out of sync with the rest of the industrialized world and, as Mr. Samuels pointed out, other nations have been competing to attract additional business investment knowing that such investment will help improve their own economies.
Meanwhile, the United States continues to lag behind and the situation would only get worse with some of the proposals being discussed that would penalize companies looking abroad to expand their business. So to paraphrase Mr. Samuels’ question this morning, why are we focused on how to build higher walls and instead figure out better incentives to drive the investment that everyone agrees is needed to get our economy back up to speed and competitive into the future. The only sure way to do this is to undertake a serious effort to enact comprehensive tax reform. To accomplish this goal everyone is going to need to keep their eye on the prize.
Yesterday morning, the Federal Reserve Board released a re-proposed rulemaking regarding “Margin Requirements for Non-cleared Swaps.” At first glance, this long awaited re-proposal seems to acknowledge what end-users like manufacturers have long held, that when derivatives are used by non-financial end-users to hedge commercial risk, manufacturers should not face the same margin or capital requirements as financial entities engaging in swaps for other purposes. However, it appears as though the Fed in the new proposal has chosen to allow the decision as to whether margin is required to remain between the manufacturer and their financial counterparty, rather than be imposed by a third-party regulator.
As a leader of the Coalition for Derivatives End-Users, the NAM has worked over the past several years to share manufacturers concerns about the potential costly burden that such margin requirements. So we are pleased that at least at first blush the Fed appears to acknowledge manufacturers’ concerns. As we dig through the full 200 page re-proposed rule we are hopeful that this rule, if finalized, could provide manufacturers the reassurance that they will not face this significant cost burden. The NAM and the Coalition will be working in the coming weeks to determine if the re-proposal addresses all of the concerns of manufacturers who use derivatives to hedge commercial risk and if additional changes to the re-proposed rule are necessary.