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Setting the Record Straight

There’s no doubt that the U.S. tax code— which includes the developed world’s highest corporate tax rate, outdated international tax rules and a host of temporary provisions—is a drag on economic growth and competitiveness. And while Manufacturers continue to push for comprehensive tax reform, NAM members recognize that, until that happens, we have to operate and compete under the current system. Unfortunately, that reality is being largely ignored in the current rhetoric flying around Washington about corporate inversions.

In today’s Wall Street Journal Miles White, the Chairman and CEO of Abbott Laboratories, sets the record straight on the realities of the U.S. tax system in his oped,  Ignoring the Facts on Corporate Inversions, and notes that legislation to block inversions would simply make a bad system worse. We agree strongly with Mr. White that piecemeal proposals to change the tax code will do more harm than good and the real solution is one Manufacturers have been pushing for all along, “fact-based, thoughtful, comprehensive [tax] reform.”

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Support the United States: Enact Comprehensive Tax Reform

Manufacturers in the United States have struggled to compete under our nation’s broken tax system for years so it’s natural that the NAM is a leader in calling for pro-growth, pro-competitive tax reform. Even though some say tax reform is “stalled” in Congress, NAM continues a constant drumbeat on the need to reform our nation’s tax code to bring us into the 21st century. Indeed, our voices are getting louder by the day as we see Washington policy makers drag their feet on reform or, worse yet,  suggest one-off changes to the tax code to address problems that would be eliminated entirely by overall reform.

While the NAM is a strong advocate for comprehensive reform of our current tax code, we also believe it is critically important to keep our current tax system in place until policymakers agree on a final reform plan. Piece-meal changes or repeal of long-standing rules will inject more uncertainty into business planning, making U.S companies even less competitive and threatening economic growth and U.S. jobs. A key objective for the association, as outlined in NAM’s “A Growth Agenda: Four Goals for a Manufacturing Resurgence in America,”[1]  is to create a national tax climate that promotes manufacturing in America and enhances the global competitiveness of U.S. manufacturers.  Manufacturers want the United States to be the best place in the world to manufacture and attract foreign direct investment. The way to do this is to enact a pro-growth, pro-competitive tax code

[1] Available at http://www.nam.org/

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Good News from Capitol Hill: the House Votes to Permanently Ban Taxes on the Internet

Amid persistent reports of historic gridlock in Washington, there was a brief flash of bipartisanship in the House this afternoon when representatives voted to permanently ban taxes on Internet access. Manufacturers know first hand that the Internet has become a critical piece of infrastructure in the United States and the 16-year ban on new state and local taxes on Internet access has helped spur the incredible amount of investment in broadband networks.

Unfortunately, this temporary moratorium will come to a halt in November 2014 unless Congress acts. Last month the House Judiciary Committee approved bipartisan legislation—the Permanent Internet Tax Freedom Act—which calls for a permanent moratorium on taxing Internet access. We applaud the House for coming together to advance the legislation.

Extending the moratorium will ensure continued robust broadband adoption and investment in the United States and promote competitiveness and job creation. Especially given our lackluster economy, the sooner Congress removes the tax threat the better. Let’s keep this bipartisanship rolling–next stop: the U.S. Senate!

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Don’t Let the Comeback Turn Into a Fallback

Abundant domestic oil and gas resources are fueling a manufacturing comeback in the United States. A recent report by IHS Global Insight found that increased oil and gas production is supporting millions of jobs, increasing household incomes, boosting trade and contributing to a new increase in U.S. competitiveness around the world. For manufacturers and other energy consumers, the development of shale oil and natural gas in the United States in particular has been a “game-changer” in terms of reduced energy costs, increased access to secure energy supplies and availability of a low-cost raw material.

The chemistry industry alone has generated billions of dollars of new investment thanks to this innovation. Manufacturers believe continued shale oil and gas development is a critical component of a successful ‘all-of-the-above’ energy strategy. So it’s no surprise that Manufacturers, both energy producers and energy consumers, support policies that will help advance—not slow down—domestic energy production.

Unfortunately, we’re disappointed to hear reports that policy makers in Pennsylvania are considering imposing a “severance” tax on energy companies based on the value of the gas extracted from wells in the state. The impact of a severance tax is easy to calculate: new taxes translate into higher costs, less production and another hurdle for a manufacturing comeback.

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Don’t Tax Our Internet: Part IV

Over the past 16 years, the Internet has become a critical piece of infrastructure for Manufacturers in the United States and a ban on new state and local taxes on Internet access has a lot to do with the incredible amount of investment in the broadband networks. Unfortunately, unless Congress acts soon, this temporary moratorium will expire for the fourth time in November 2014 with the potential of raising costs significantly for all businesses and families.

NAM members wholeheartedly agree with the conclusion of economist George Ford in a recent paper released by the Phoenix Center that a permanent Internet Tax Moratorium will ensure continued robust broadband adoption and investment in the United States. We strongly support bipartisan legislation, H.R. 3086, the Permanent Internet Tax Freedom Act, scheduled to be taken up tomorrow by the House Judiciary Committee. Kudos to Committee Chairman Bob Goodlatte (R-VA) along with Reps. Anna Eshoo (D-CA), Spencer Bachus (R-AL), Steve Cohen (D-TN) and Steve Chabot(R-OH) who cosponsored the bill. Extending the moratorium encourages innovation and economic growth and the sooner Congress removes the tax threat the better.

UPDATE:

The Judiciary Committee has officially put the permanent kibosh on taxation of access to broadband internet. This is an important step and manufacturers urge Congress to pass this bill in an expeditious fashion.

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Small Businesses Are Taking A HIT

In NAM’s quarterly surveys of members, health care costs consistently rank as the top business challenge for manufacturers. The concerns of these companies are well-founded given the avalanche of new rules, regulations and requirements as the rollout of the Affordable Care Act continues.

It’s particularly challenging for many small and medium-size business owners who, in addition to everything else, are feeling the hit of a new fee on health insurers, also known as the health insurance tax (HIT), which translates into higher insurance premium costs for small businesses and their employees. In a June 4th op-ed in The Boston Globe, “Small business picks up Obamacare tab,” Tom Stemberg, the co-founder and former CEO of Staples, spells out the devastating impact of this tax on businesses operating on tight margins and the workers they hire. His column echoes what the NAM is hearing every day from our members – and unfortunately, it seems that it will get more and more difficult for them as implementation proceeds.

Stemberg knows firsthand the challenges facing smaller businesses and what it takes to succeed and grow—and we agree with him wholeheartedly that it’s time to repeal the Health Insurance Tax.

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Permanent Tax Policy: We Certainly Could Use It!

Uncertainty is the bane of manufacturers and indeed the entire business community. It’s one thing when nature throws you a few curve balls but it’s an entirely different story when we create this uncertainty ourselves. And this is the case with a huge chunk of our tax code, which expired at the end of 2013, leaving many companies in limbo on a number of fronts.

Senators currently are considering retroactively extending the “extenders package,” for 2014 and 2015 and NAM supports this effort as a bridge as we work towards comprehensive tax reform. Yet it’s still a short-term fix for a long-term problem.

Senator John Thune (R-SD) understands this and, along with several colleagues, is pushing to make some of these temporary provisions a permanent part of the tax code. Manufacturers think this is an excellent—and long overdue—idea.

Senator Thune’s proposal, which he is proposing as an amendment to the pending tax bill, includes a permanent and more robust R&D tax incentive for innovating companies and more generous write-offs for smaller businesses making capital investments. The House agrees with this approach and last week approved a bill by Reps. Kevin Brady (R-TX) and John Larson (D-CT) that would make a strong R&D incentive a permanent part of our tax system.

Like the House bill, Senator Thune’s R&D tax credit proposal would boost the alternative simplified credit (ASC) to 20 percent, increasing its incentive value and ensuring continued U.S. leadership in global innovation. As for encouraging small business investment, the Senator would allow companies to take an immediate write-off for up to $500,000 in investments if they invest up to $2 million per year.  This proposal parallels a bill authored by Reps. Patrick Tiberi (R-OH) and Ron Kind (D-WI) , which passed the Way and Means Committee last month, that would make Section 179 permanent at the same levels. We hope that the House will take up this bill in the near future as well.

And the push for permanent, pro-growth tax policy shouldn’t stop there.  Other temporary “extenders” also should be made permanent ASAP. Including bonus depreciation, deferral for active financing and the “look-through” rule for controlled foreign corporations.

Making these provisions a permanent part of the tax code will spur business investment and job creation, which is key to economic growth and competitiveness. And those are goals of which all Americans are certain.

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House Taxwriters Move Forward on Tax Reform Part I

Kudos to House Ways and Means Committee members who today approved several bills that will revive, make permanent and—in some cases—improve several expired tax provisions that are high priorities for manufacturers.

The individual bills call for a permanent and robust R&D credit, provide first-year expensing for capital investments by small manufacturers, allow manufacturers to defer tax on active financing income earned overseas and let U.S. multinationals redeploy cash overseas without triggering an additional U.S. tax burden. Taken together these bills will stimulate innovation, create more jobs, spur investment and make U.S. manufacturers more competitive—all factors that are critical to our nation’s economic growth.

In an April 28th letter to Committee members in advance of the hearing, the NAM pointed out that legislative action to make permanent these important tax provisions represents a significant step forward in achieving our goal of pro-growth, pro-manufacturing tax reform. Here at the NAM we’re committed to both ending the continuing cycle of temporary tax provisions and advancing much-needed comprehensive tax reform. Today Ways and Means members added a strong voice to these critical provisions and demonstrated their commitment to pro-growth tax policy. Thanks to Chairman Camp and his Committee for getting the ball rolling towards these goals.

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House Subcommittee Looks At Bill to Fix Tax Nightmare Facing Traveling Workers

Our nation’s increasingly mobile workforce is subject to an ever-changing hodgepodge of state tax laws, creating a compliance and fiscal nightmare for both companies and their employees on temporary assignments to other states.

There is an easy solution to the problem and Manufacturers have joined others in the business community in calling for legislation— the Mobile Workforce State Income Tax Simplification Act of 2013 (HR 1129)—clarifying that states can only assess income taxes on non-resident employees who work in the state for more than 30 days in a calendar year. HR 1129—and other similar proposals—have been stuck in legislative limbo for a while so kudos to the House Judiciary Regulatory Reform, Commercial and Antitrust Law Subcommittee for holding a hearing today on the bill.

NAM members are squarely behind this common-sense approach to a taxing problem and hope that the subcommittee’s hearing today will spur legislators to act quickly on this important measure.

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The President’s Ideas on Tax Reform Will Hurt, Not Help Manufacturers

 

Manufacturers haven’t been shy in pushing for pro-growth, pro-competitiveness and pro-manufacturing tax reform.  We know firsthand how our current complicated and antiquated tax code, with the highest corporate tax rate among developed countries, makes it more difficult for manufacturers and other businesses in the United States to compete and succeed in a global economy. So our ears perk up when we hear the President mention tax reform, though tonight he touched only around the edges.

Previously, President Obama has called for a 28 percent tax rate for corporations – it is simply not enough. That wouldn’t even put US companies on a par with the rest of the developed countries whose average corporate tax rate is about 25 percent—and why should we be average? NAM supports a corporate tax rate of 25 percent or lower—with an accent on the lower.

We’re also more than a bit concerned about his talk of unspecified “loophole closers” or the more technical term, “base-broadening.”  Manufacturers are pragmatic enough to recognize that broadening the income tax base will be part of any debate over lowering corporate tax rates, but policy makers need to consider the potential impact of expanding the tax base on economic growth and the competitiveness of capital-intensive industries like manufacturing. Some current tax rules are key to a strong manufacturing sector, and the benefits of these provisions should be maintained in a new system.

The NAM supports greater investment in infrastructure but the tax code isn’t the place to look for financing.  The President’s proposal to repatriate overseas earnings as a means to direct additional investments in infrastructure is a very complicated financing tool that will make it even harder to achieve a modern international tax system that’s so important for U.S. manufacturers.

Like the President, manufacturers support an “all of the above” energy strategy. And we truly mean “all.” so we were concerned that the President again is suggesting we create winners and losers in the energy sector by increasing taxes on the oil and gas industry. It’s time to retire that tired, inaccurate talking point and acknowledge that manufacturers consume one-third of our nation’s energy ad know that higher taxes on some energy producers will translate into higher energy prices.

Finally, with his focus solely on corporate tax reform, the President totally ignores two-thirds of manufacturers—companies organized as “flow throughs,” like S corps and pay taxes at the individual level.  These companies are a critical part of the manufacturing ecosystem and dealing them out of the tax reform effort could leave them with a higher tax bill.

Here’s the bottom line for us: a new system should not result in a net increase in manufacturers’ U.S. tax burden—a change that would undoubtedly derail efforts to enhance U.S. economic growth, investment and jobs.  Unfortunately, the ideas the President outlined tonight are not good news for U.S. manufacturers.

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