Yesterday more than 100 associations, representing a cross section of industries on the front line trying to grow and create jobs in a fragile economy, urged in a letter to conferees on the payroll tax cut extension bill HR 3630 to include in the final conference agreement an extension of 100% bonus depreciation (sometimes referred to as 100% expensing) through 2012.

This provision has garnered bipartisan, bicameral support as well as the support of the White House. The broad support is due in part to the fact that bonus depreciation allows manufacturers to write off the full cost of capital investments, e.g. plant machinery and equipment, in the year of purchase rather than over the depreciation life of the capital investment, which typically span 10 to 20 years.

Given our fragile economy, this provision gives a temporary boost to the customers who want to buy and the suppliers who want to manufacture capital equipment in the USA.  Jobs are maintained and created. Just ask small manufacturer Campbell Fittings of Boyertown, PA, about job creation related to this provision effective for past 2 years. Bonus depreciation drove his company’s decision to make more capital investments that resulted in hiring 40 new workers in the past 15 months to run the new equipment. If 100 percent bonus depreciation were extended through 2012, he plans to make more capital investments.  The new equipment allows his company to compete with foreign competitors. 

Today’s Wall Street Journal article “With Tax Break Corporate Rate is Lowest in Decades” was disingenuous in citing a price tag of $55 billion in each of the past two years for bonus depreciation.  Bonus depreciation is a timing issue, and as such, that means companies can write off the cost of a $100,000 piece of new machinery purchased this year and thus would not be taking depreciation for the next nine years for a typical piece of machinery.  

Kudos to Congress and the Administration in recognizing this private sector job creating provision given our abysmal unemployment rate exceeding 8 percent. Capital investments equal putting people back to work.

Although one might think that it was near impossible, the U.S. tax code just got worse for manufacturers of medical devices. Manufacturers lament the IRS’s issuance of a new regulation to implement 2.3% excise tax on medical devices that was included in the President’s health care law. The NAM has opposed this tax because of the impact it will have on the ability of the medical device industry, a true American success story, from competing and innovating on the new products and devices that will help save lives.

This new tax appeared during the debate on the Patient Protection and Affordable Care Act, as a way to help “pay for” the bill. The 2.3% tax will have the effect of raising the effective tax rates for medical device companies – over 80% of which are small businesses with fewer than 50 employees – forcing these companies to have to make tough decisions about how to fill the earnings lost to additional taxes.

At a time when so much of the conversation in Washington centers on the need to increase jobs, stimulate growth and encourage innovation, the imposition of this excise tax completely contradicts these messages. U.S. medical device manufacturers are the world-leaders and the imposition of this new tax will have the effect of making the industry less competitive and reducing capital to invest in new R&D, new technologies and new employees. With contradictory actions like these, praising the industry for its life-saving innovations while slapping a new tax on them, it’s no wonder that so many have expressed a lack of faith in what’s going on in Washington.

Carolyn Lee is NAM’s Senior Director of Tax Policy

The House Committee on Agriculture took up several pieces of bipartisan legislation that would help prevent unnecessary and harmful regulation of derivatives end-users – and ensure the original intent of Congress is upheld. There has been growing concern in the end-user community that proposed regulations to implement the Dodd-Frank bill could go beyond the intent of Congress and prove damaging to economic growth and U.S. competitiveness.

The bills include: H.R. 2682, the Business Mitigation and Price Stabilization Act; H.R. 2779, to exempt inter-affiliate swaps from certain regulatory requirements;  H.R. 3527, Protecting Main Street End-Users from Excessive Regulation; H.R. 1840, requiring the Commodity Futures Trading Commission to include a cost-benefit analysis of their regulations, and; H.R. 2586, the Swap Execution Facility Clarification Act.  Each offer solutions that would help prevent unnecessary and harmful regulation of derivatives end-users. The NAM stands in strong support of all of them.

Fortunately the bills passed out of committee with bipartisan support  and hopefully the momentum necessary to be on the house floor soon. These bills would ensure that any negative impacts of the Dodd-Frank implementation on end-users can be mitigated.

The January edition of Member Focus hit mailboxes this week and is also available here. Below is this month’s column from NAM President and CEO Jay Timmons on the need for tax reform.

Time for Leadership on Tax Reform

By Jay Timmons, president and CEO, National Association of Manufacturers

Jay Timmons, NAM president and CEO

Congress and the President concluded 2011 by showcasing the dysfunction that has inspired cynicism among the American people.

The most recent fight centered on whether an extension of the so-called “payroll tax holiday” would be in effect for two months or for an entire year. The two-month extension won the day, so Congress and the President will have this debate again soon.

Businesses cannot plan a budget or operate efficiently when our elected leaders are running the country on a month-to-month basis.

Then again, no one can praise Washington’s economic logic.

Last summer, our leaders finally acknowledged our nation’s tremendous debt problem. Congress and the Administration agreed to cut $1.4 trillion over 10 years—an amount that matches our deficit for one year—and empowered a “Super Committee” to get the job done.

During deliberations, the Super Committee refused to touch one of the main drivers of our debt: entitlement programs like Social Security and Medicare, which comprise 60 percent of the budget.

The Super Committee failed to reach a deal—and nothing was done to ensure long-term sustainability of these entitlement programs. Then, attention turned to the expiring payroll tax holiday. (continue reading…)

Yesterday NAM Board Member and President and CEO of Marlin Steel Wire Drew Greenblatt unveiled a new laser at their facility in Baltimore Yesterday. In attendance at the event was Baltimore Mayor Stephanie Rawlings-Blake (D-MD), Senator Ben Cardin (D-MD), Congressman C.A. “Dutch” Ruppersberger (D-MD) and Congressman John Sarbanes (D-MD).

Marlin Steel Wire President and CEO Drew Greenblatt is jointed by Sen. Ben Cardin (D-MD), Baltimore Mayor Stephanie Rawlings-Blake (D-MD), Rep. C.A. "Dutch Ruppersberger (D-MD) and Rep. John Sarbanes (D-MD) at the ribbon cutting for a new state of the art laser.

Important policies such as the R&D tax credit and bonus depreciation allow companies like Marlin Steel to invest in new technology and equipment. This investment helps create jobs not only with the companies purchasing the equipment but also the manufacturers of the equipment and all the way down the supply chain.

Yesterday’s event was a great opportunity for these members of Congress to see first-hand the impact of these policies.

This week Senators Collins (R-ME) and McCaskill (D-MO) introduced a comprehensive end-of–the-year tax bill that contains a lot for manufacturers to like. The bill includes provisions that will benefit employers and employees alike by fostering an environment well-suited toward job creation, innovation, and economic growth.

It includes extensions of expiring tax provisions, like the R&D Tax Credit and 100% Bonus Depreciation, that are critical to manufacturers’ ability to invest in their businesses for the future.  Tax credits for investment in high-tech small businesses in this legislation offer incentives to innovate in the United States.  The bill also provides increased funding for highway and clean water projects.

The Collins-McCaskill bill offers some relief from the stranglehold that regulation has on American businesses. The legislation would put a stop the EPA’s harmful Boiler MACT rules. Additionally, it would require federal agencies to account for the true cost of each regulation – in a sense, auditing themselves to ensure that regulatory action won’t send shockwaves through our economy.

Unfortunately the good provisions and the positive, pro-growth environment they would create will be completely undermined by the punitive ways this bill is paid for.

It is yet another unfortunate example of big government looking to pick which sectors of our economy should bear the brunt of the tax burden. Targeted tax hikes on energy companies and manufacturers and a surtax on higher-income Americans will punish job creators and create a significant obstacle toward their innovation, investment, and ability to create jobs. 

Tax increases in a time where we are trying to get America back on its feet are not an acceptable option – no matter what the positives of this legislation are. Doing so will be taking one step forward and two steps back.

There is so much good in this bill – let’s find a way to utilize those provisions to create the pro-growth, pro-jobs atmosphere that America so badly needs right now.

Bipartisan action in Congress can happen and did occur today as lawmakers in the House Judiciary Committee favorably reported HR 1864, the “Mobile Workforce State Income Tax Simplification Act of 2011.”  This bill represents a commonsense tax simplification for both employers and employees by creating a bright line test to establish fair and uniform rules clarifying that states cannot assess income taxes on non-resident employees who temporarily work in a state.

If the bill is enacted, nonresident employees who work in a state for 30 days or fewer during a calendar year would not have to file a state income tax return or pay state income taxes to the nonresident state. Also, employers would no longer be required to calculate and remit state income tax withholdings for these short work periods.  Some 30 states currently have laws requiring non-resident employees to pay state income taxes based on working only one day in the non-resident state.

The yearly ritual of filing taxes causes enough nail biting and the thought of having to file an additional state income tax return simply because an employee worked one day in a non-resident state seems beyond absurd.  This prudent legislation would eliminate some of the unreasonable tax filing burdens imposed on both employees and employers.  HR 1864 would be a win-win situation bringing common sense tax change for job creators and workers and we will strongly advocate that this legislation be brought before the full House for a vote as soon as possible.

Once again a number of important tax incentives are scheduled to expire on December 31^st, clearing the way for a tax increase on millions of U.S. taxpayers that benefit from these provisions. Manufacturers have an interest in a number of these provisions including the Controlled Foreign Corporation (CFC) look through rules, deferral for active financing, and the R&D tax credit that help us create and retain jobs and compete in the global marketplace.

Because of the importance of these and other provisions to the business community, the NAM today joined more than 1,500 other companies and organizations on a letter to all members of Congress urging them to act quickly to extend these pro-growth, pro-job provisions.

While many in Congress focus on much-needed tax reform, the letter makes a strong case for why these “extenders” can’t wait until negotiators agree on how to revamp the tax code.

“The lack of timely congressional action to extend these provisions would inject more instability and uncertainty into the economy and further weaken confidence in the employment marketplace… Even though Congress has begun to consider tax reform proposals, a wide-ranging group of taxpayers is making decisions right now related to current law which will have an immediate impact on the economy.”

Plain and simple, “tax extenders” mean jobs and competitiveness for the U.S. economy It’s something that we can ill-afford to wait for in these unsettled economic times.

Manufacturers have continued their strong opposition to increasing taxes on business owners in the midst of the most serious economic downturn since the Great Depression. Last week we urged the Senate to oppose an anti-growth tax proposal to create a new permanent surtax on individuals with income over $1 million. Earlier this week Senator Marco Rubio (R-FL) raised our opposition to the surtax when questioning Treasury Secretary Geithner about President Obama’s plans for deficit reduction and job creation. 

We continue to believe that reform of our anti-growth tax system is critical to address our nation’s long term fiscal and economic challenges and we have long warned that tax increases could put more jobs at risk at a time when the unemployment rate already hovers above 9%.  Senator Rubio echoed manufacturers’ position in the excerpt below from Tuesday’s Small Business & Entrepreneurship Committee hearing. Here is an excerpt from Senator Rubio’s remarks:

“The manufacturers say the same thing, the National Association of Manufacturers says it’s a job killer… What about this? This is a quote from the President.  He said that, ‘the last thing you want to do is raise taxes in the middle of a recession because that would just suck up, that would take more demand out of the economy and put business in a further hole.’”

History has shown us very clearly that tax hikes, even speculated ones, significantly affect the way business act in the present and plan for the future.  Plain and simple, it throws up yet another barrier to job creation and economic growth.  If we’re serious about putting Americans back to work and returning to prosperity, we need comprehensive tax reform that will result in a pro-growth and pro-job creation tax code and that take tax hikes.

Job creation and increased supply and demand in the manufacturing community is a centerpiece of bipartisan legislation introduced today by Sens. Michael Bennet (D-CO) and Johnny Isakson (R-GA). With support from manufacturers and other business leaders, they introduced the Sensible Accounting to Value Energy (SAVE) Act, which would improve the ability of federal mortgage loan agencies to determine the energy costs a homeowner can expect to pay over the life of a mortgage and would increase taxpayer qualification of federal mortgage loans for energy-efficient homes. 

The benefits to this bill are clear – it will offer homeowners reasonable financing options to make their homes more energy efficient. As a result, manufacturers and their employees across the U.S. stand to see a significant increase in demand for energy-efficient products, ranging from insulation to HVAC units and more. 

CEO of Johns Manville Todd Raba speaks about the SAVE Act

According to recent studies, homeowners spend approximately $2,200 on energy costs per year – a number that remains high due to barriers in mortgage financing of energy-efficient improvements. If federal mortgage loan agencies are allowed to account for these expenses at the outset of a home purchase, homeowners could properly plan for upgrades that will save them money in the long run while creating immediate manufacturing demand. 

In today’s struggling economy, the SAVE Act is expected to create approximately 83,000 jobs in a variety of industries across the country. This is a win-win solution for the economy, the environment, job seekers and manufacturers. 

Monica McGuire is senior policy director for taxation, National Association of Manufacturers.