Manufacturers that sell/and or distribute  their products outside of their home state—and that’s most Manufacturers—currently face a myriad of confusing and conflicting tax rules that cost them time, money and sometimes, business.  In a tax reform options paper  on Economic and Community Development released May 15th, the Senate Finance Committee did a good job of outlining some changes Congress could make to ensure that tax rules are consistent among the states, thus reducing potential double taxation and compliance costs, while also providing some certainty to states struggling to balance their budget.  And that’s a win-win in our eyes.

The NAM-supported chances include:

• Establishing uniform rules for taxing digital goods and services so that manufacturers would no longer be subject to taxation from multiple states based on just one online transaction.  The Digital Goods and Services Tax Fairness Act, introduced last Congress by Sens. John Thune (R-SD) and Ron Wyden (D-OR) would eliminate duplicative taxes on digital goods;
• Creating a bright-line test for when a state can assess income tax on an out-of-state employee who is temporarily working in that state.  The Mobile Workforce State Income Tax Simplification Act, introduced by Rep. Howard Coble (R-NC), would establish a 30 day bright-line test before states could tax these employees.
• Permanently extending the moratorium on Internet access taxes and multiple and discriminatory taxes on electronic commerce.  Without an extension of this moratorium, which expires in 2014, businesses of all sizes could be facing new taxes, further increasing the cost of doing business in the United States.  The Permanent Internet Tax Freedom Act of 2013 introduced by Sen. Kelly Ayotte (R-NH) in the Senate and Steve Chabot (R-OH) in the House, would permanently ban the internet tax; and,
• Clarifying how much activity a business must engage in within a state to become subject to that state’s business activity taxes.  The NAM has supported legislation (Business Activity Tax Simplification Act) to establish a bright-line, physical presence test clarifying when states can impose business activity taxes so that manufacturers will no longer be subject to punitive tax assessments by states where they have no plant or employees in the state.

While the Senate taxwriters make it clear that their paper discusses options, not proposals, we’re glad that these common-sense clarifications were part of the mix.  Each of the options outlined above would further spur economic and job growth by reducing the complexities brought on by having a plethora of differing state taxation rules creating administrative, compliance, and duplicative taxation burdens for manufacturers in the United States.

Christina Crooks is director of tax policy, National Association of Manufacturers.

Healthcare costs are constantly on the minds of manufacturers. Almost three fourths of the companies responding to a recent NAM survey said rising healthcare insurance costs are a primary business challenge for them. So we’re glad to see that these concerns are resonating in Congress where House Small Business Health and Technology Subcommittee Chair Chris Collins (R-NY) today held a hearing to take a look at the impact on small businesses of the new fee on health insurance fee, set to kick in next year.

The fee, which was included in the healthcare reform law, will raise some $100 billion from health insurance providers over the next ten years. And since many small businesses obtain their employees’ health care coverage from these insurance companies, these additional fees are likely to be felt in premium costs. Indeed, the fee could raise the cost of employer-sponsored insurance by 2 to 3 percent in 2014, imposing a cost of nearly $5,000 per family by 2020 according to a study released earlier this year by the National Federation of Independent Business Research Foundation.

Fortunately, Congress still has an opportunity to avert this crisis before it starts. On the House side, Rep. Charles Boustany has introduced bipartisan legislation –H.R. 763 — to repeal this annual fee on health insurers and a similar bill — S.603—has been introduced in the Senate by  Sen. John Barrasso (R-WY). Manufacturers urge lawmakers to repeal this job killing tax ASAP.

During the recent debate in the Senate on the Marketplace Fairness Act, S. 743, another 21^st century tax issue popped up, albeit briefly.  We think it’s worth going back to consider an amendment submitted by Sen. John Thune (R-SD) that clarifies the taxation of digital goods and services. This amendment is based on bipartisan legislation the Senator introduced last Congress with Senator Ron Wyden (D-OR).

Simply put, digital goods are electronic files sold online. This includes software, manuals in digital form, and images among other products. Digital services include products ranging from cloud computing to alarm monitoring. These are all products and services that may be leveraged by manufacturers to increase the efficiency of their shopfloor, enhance their ability to connect with customers, and help them better manage their supply chain.

When these goods and services are “shipped” online it is not always as simple as traveling from point A to point B. These digital products can actually bounce around to many “locations” in cyberspace all in the blink of an eye. Today’s current tax regime allows multiple states to tax a manufacturer or other taxpayer on just one transaction.

Manufacturers are already under intense economic pressure ranging from global competition and other adverse and unnecessary regulations in the United States. Fixing this statute with Senators Thune and Wyden’s proposal that would eliminate duplicative and discriminatory taxes would increase manufacturers’ ability to compete.

We look forward to working with both chambers on this very targeted issue so that manufacturers have one less obstacle in their way as they continue to lead America’s most innovative industry.

This morning, the Washington Post editorial board again called for a carbon tax with the piece “Carbon tax is the best option Congress has.”  It’s the second time in the last two months (and fourth in the past six months) the Post has called for this tax, which has the potential to hurt jobs and our economy. It’s a surprising amount of attention for a concept that has little to no political legs in Congress.

Congress isn’t talking about a carbon tax because when a cap-and-trade bill like Waxman-Markey is labeled a “job-killing energy tax” and can’t win support in the Senate, it’s hard to get behind a bill that would impose an actual energy tax.

Also, a carbon tax does not appear to be the economic or environmental panacea the Post is making it out to be.  A recent economic study for the NAM conducted by the nonpartisan NERA Economic Consulting looked at two carbon tax scenarios: one levied at $20 per ton increasing at 4 percent, and the other designed to reduce carbon dioxide (CO2) emissions by 80 percent. In both cases, any revenue raised by the carbon tax would be far outweighed by the negative impact to the overall economy.

Both cases would hurt families and businesses, resulting in higher prices for natural gas, electricity, gasoline and other energy commodities.  The $20/ton case reduces U.S. CO2 emissions by only about 30 percent, a much smaller amount than was called for in Waxman-Markey and by leading climate advocates.  To get to the levels they are seeking, 80 percent reductions by 2050, the economic costs skyrocket. (continue reading…)

As the old saying goes, every journey begins with a first step. We had a few positive and solid first – and second – steps today for derivatives end-users.

A little while ago, the House Financial Services Committee completed a markup on a number of Dodd-Frank related bills including  H.R. 634, “The Business Risk Mitigation and Price Stabilization Act of 2013” and H.R. 677, “Inter-Affiliate Swap Clarification Act”. H.R. 634 was reported out of committee with a unanimous 59-0 vote and the inter-affiliates bill was reported favorably with a vote 50-10. We believe that now that the relevant committees have both completed their review of these common-sense and critical bills, the House leadership will bring them to the floor for consideration by the full House of Representatives in the coming weeks.

Also this afternoon, Sens. Johanns and Tester led a large bipartisan group in introducing the Senate companion to H.R. 634 (the number is not yet available). The full list of original cosponsors includes: Senators Mike Johanns (R-NE), Jon Tester (D-MT), Roy Blunt (R-MO), Mike Crapo (R-ID), Joe Donnelly (D-IN), Kay Hagan (D-NC), Heidi Heitkamp (D-ND), Amy Klobuchar (D-MN), Jerry Moran (R-KS), Richard Shelby (R-AL), Pat Toomey (R-PA) and Mark Warner (D-VA).

The Senate introduction came on the heels of a concerted effort by end-users to educate Senate offices on the realities of end-user use of derivatives trades – we use them to hedge every-day commercial risk, not for speculative purposes. Thus, end-users like the thousands of manufactures who utilize these risk-management tools shouldn’t be regulated the same was as those companies that are speculating.

We continue to work with Senate offices to get a Senate companion to H.R. 677 (the inter-affiliates bill) introduced in the near-term. So although this is certainly positive progress, we are simply nearing the beginning of the second-act which is getting the Senate to take action on both of these important and common-sense bills that will ensure that main street businesses are able to focus on growing and investing in their business and their growth.

Dorothy Coleman, the NAM’s Vice President of Tax and Domestic Economic Policy, brought manufacturers’ support of pro-growth tax reform to a panel discussion, hosted by Politico today, which featured a variety of policy officials in Washington, D.C. talking about the impact of tax policy in the energy sector.

As consumers of one-third of our nation’s energy, manufacturers have a lot at stake when it comes to tax and energy policy. The conversation touched on a wide variety of topics but it was clear that a need for pro-growth tax policy that doesn’t pick winners and losers is a fundamental aspect of reforms. We want to ensure that the U.S. is the best place in the world to manufacture and raising taxes on energy companies, who require massive capital investment to develop resources, will only undermine that goal.

Some of the panelists suggested the implementation of a carbon tax as potential reform, but Mrs. Coleman quickly refuted those calls, saying that the revenue gains were far outweighed by the economic devastation that would ensue – loss of jobs, wages, higher prices and a less competitive America.

Panel discussions like the one held today help shape the way tax reform is done – and just like today, the NAM will remain at the center of the conversation.

We were disappointed to hear Treasury Secretary Jack Lew defend yesterday the onerous medical device tax that went into effect on January 1st as part of the Affordable Care Act. While Lew admitted that the idea behind the tax was not to target startup medical device companies, the reality is the 2.3 excise tax impairs innovation as it is imposed on all revenues rather than just profit. It is clear that Lew is out of touch with the greater comprehension of the harmful nature of the tax as just last month 79 senators voted in favor of its repeal, demonstrating strong bipartisan support during the budget debate.

The NAM urges the Administration to look at the real world effects the medical device tax is having on manufacturers competing in the global marketplace and to recognize the Senate’s strong vote as marker of bipartisan understanding that the tax is indeed hurting jobs, investment and the ability for the United States to maintain its position as the global leader in medical technology innovation.

House Ways & Means Chairman Dave Camp (R-MI) normally wields the gavel during House committee hearings, but today brought an unusual role for him – witness. Chairman Camp appeared before the House Small Business Committee to talk about the impact of tax reform on small businesses. With two-thirds of manufacturers paying taxes at the individual rate, the NAM was rather interested in what Mr. Camp had to say.

As you might expect from his record as Chairman, Camp had a lot of positive things to say about the important role small business plays in job creation and economic growth. All true statements, but what caught our attention was his commentary on how small to medium sized manufacturers will be adversely affected without comprehensive reforms. Manufacturers have been telling policymakers for a long time that without a simpler, fairer code that reduces the tax burden, we’re going to see any growth come to a grinding halt. Money sent to Washington is money that cannot be put into hiring workers, expanding production and growing their operations.

Clearly Chairman Camp gets manufacturers’ message and we appreciate his continuous efforts to move forward with comprehensive tax reform. The question is – how many other policy makers truly understand the economic boom that would be unleashed if they put a pro-growth tax system into action?

At first blush, Manufacturers were somewhat optimistic about the framework for business tax reform the President laid out today in the fiscal 2014 budget plan he sent to the Hill. While NAM is firmly behind comprehensive, that is business and individual, tax reform, we thought maybe the President’s plan for business tax reform could help jump start a broader debate.  And frankly, it’s hard for manufacturers to criticize most of the broad tax reform goals the President laid out: eliminate loopholes, broaden the base and cut the corporate tax rate; strengthen manufacturing and innovation; strengthen the international tax system; simplify and cut taxes for small businesses; and restore fiscal responsibility and not add to the deficit. And when we looked at more specifics of the budget, we were pleased to see that at least two provisions important to manufacturers—a strengthened and permanent R&D credit and permanent expensing for small businesses were part of the plan. Unfortunately, the good news ends here.

Let’s turn to the Administration’s goal to “strengthen international tax rules.”  We’re embarrassed that we thought “strengthen” meant improving our outdated worldwide system.  We were wrong. The President’s idea of strengthening means imposing some $157 billion in new taxes on American worldwide companies, actually making our uncompetitive, antiquated system worse than it is. That’s certainly not going to help U.S. manufacturers or any U.S. company struggling to compete in a global marketplace. Nor will manufacturing be strengthened by imposing some $44 billion in new taxes on energy companies. Manufacturers use about 1/3 of our nation’s energy.  New taxes on energy producers will increase energy costs for consumers and discourage the type of investments in new sources of energy in recent years that have been a “game changer” for manufacturers and other energy consumers.

We also were confused that cutting taxes for small businesses is an element of the President’s tax reform framework since the budget itself includes a slew of tax increases targeted to individual taxpayers that also will hit many of the almost two-thirds of manufacturers that operate as “S corps” or other ”flow through” entities. And how do you explain to the many family-owned small businesses—including a number of manufacturers— that their hard-won permanent estate tax relief signed into law by the President in January now is temporary. Five years from now the estate tax rate will go up and the exemption will go down.  That’s the kind of change that not only results in a higher tax bill but also higher planning costs and more uncertainty.

Frankly, we’re also puzzled with the number of new tax incentives included in the budget plan given that “broaden the base” tops the list of priorities in the President’s tax reform framework.  Manufacturers know firsthand how difficult it is going to be to agree on base broadeners. Adding more to the mix will only make that effort more difficult. And while we’re on base broadening, we’re concerned that the President identifies roughly $300 billion “revenue changes and loophole closers” either as part of the reserve for revenue neutral business tax reform or to offset other parts of his budget. This creates winners and losers before we even begin the debate on tax reform. And more importantly, and as we’ve said many times before, piece-meal changes or repeal of long-standing rules outside of tax reform will inject more uncertainty into business planning, making U.S companies even less competitive and threaten economic growth and U.S. jobs.

Congressman Peter Roskam (R-IL) held a manufacturing roundtable today in Chicago, hosting over 40 CEOs, and local business owners, to discuss tax reform and the best methods to enact a tax system that will allow manufacturers in the U.S. to compete on a global scale. Congressman Roskam is a member of the Ways & Means Committee and a co-chair of the Manufacturing Working Group formulated to develop recommendations as Congress begins work on comprehensive tax reform.

Manufacturers in the U.S. face a 20% cost disadvantage compared to our global competitors. The current tax system plays a major role in that disparity and, frankly, it makes us less competitive as a nation. The NAM will be submitting comments to the tax reform working groups in the near future to help ensure that manufacturers voice is heard as the process continues.

NAM members such as Boeing, Devon Corporation, Case New Holland, Inc. and others joined the Congressman at the event – spreading the message that manufacturers need tax reform on both the corporate and individual rates. Two-thirds of all manufacturers pay taxes as S-Corps.

Events like these are an excellent opportunity for manufacturers to share our priorities and we certainly appreciate Congressman Roskam’s focus on policies that will lead to a true manufacturing resurgence.