Taxation

AT&T Chief Talks Growth in Washington

Randall Stephenson, chairman and CEO of AT&T, appeared the Economic Club of Washington, DC, on June 17 to talk about the key ingredients for economic growth in the United States.

In a wide-ranging policy discussion, the head of the telecommunications giant honed in issues like immigration reform and tax reform as opportunities to drive and attract investment. Stephenson also highlighted the need for strong trade policies and the importance of free trade agreements. Currently, the United States’ ability to negotiate new agreements and complete pending ones is hindered by the lack of Trade Promotion Authority, which helps streamline the negotiation process.

Stephenson’s remarks send a powerful message from the business community about the necessity of engaging with Washington. Policymakers, whether on Capitol Hill or in the executive branch, need to hear from America’s job creators—because like it or not, what happens in Washington matters to businesses. We need to be at the table for these important discussions.

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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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Insanity… according to Albert Einstein

“Insanity: doing the same thing over and over again and expecting different results”… Albert Einstein

Well the Senate is once again trying to disprove this wisdom with yet another vote on the so-called “Buffett Tax.” According to our count this will be the 9th time that Senate Democrats have tried to use this tax increase to pay for something. This time around it’s attached to S. 2432 and while the NAM doesn’t have a position on the underlying bill, we do however oppose raising taxes on America’s small and medium sized manufacturers. That’s why, just this morning, the NAM’s Vice President for Tax and Domestic Economic Policy Dorothy Coleman sent a letter to all Senate offices urging Senators to oppose this tax increase.

As we’ve said before, nearly two thirds of manufacturers are organized as a pass-through entity and pay taxes through the individual side of the tax code. Thus, this permanent tax increase would hit those very manufacturers that are the back-bone of the nation’s manufacturing supply chain and reduce the amount of capital available to these business owners to reinvest in their company and their workforce.

This is a bad idea today, just as it’s been a bad idea since it was first conceived a few years ago. Raising taxes on small businesses to pay for new spending is not the way to get our economy back on track and growing the way it needs to. Speaking to the aim of the student loan bill specifically, raising taxes on job creators isn’t the way to ensure that jobs exist for those who are graduating from higher education.

Instead what manufacturers of all sizes need is comprehensive tax reform to ensure that we have a modern, competitive, permanent, pro-growth, pro-manufacturing tax code that allows them to compete and invest and grow and that will remove the constant uncertainty surrounding what policies will be in place in 6 months as well as in 6 years. That’s what manufacturers need and that is what will make the United States once again the best country in the world to manufacture.

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Exactly the Point

Manufacturers applaud the upcoming action in the House of Representatives to consider “America’s Small Business Tax Relief Act of 2014,” H.R. 4457, to make Section 179 permanent. We hope that this common-sense bill will pass with broad bipartisan support.

As we’ve often talked about in this space, making this provision permanent is a 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. Having certainty over the tax treatment of critical investments will make planning for future investment significantly easier. Capital investment is key to economic growth, job creation and competitiveness. Consequently, enactment of this policy would amount to a major step towards a tax code that will promote investment.

Take for example SASCO Chemical Group, Inc. (SASCO), a Georgia-based third generation family-owned chemical manufacturer with worldwide distribution. According to SASCO’s President Marc Skalla, “Innovation has made us who we are today; reinventing ourselves through innovation will secure our future and make us who we will be tomorrow.” To continue this forward-thinking progression, SASCO opened a state-of-the-art Innovation and Technology Center that houses their R&D, Technical, and Process-Pilot plant team. Over the past few years, SASCO has relied heavily on both Section 179 and bonus depreciation provisions in the Tax Code to enhance cash flows on scale up projects originating mainly from their Innovation and Technology Center. According to Marc, “without such provisions, our ability to transition innovations from a small-scale lab environment to full production lines would be severely hampered.  Capital projects such as those our Company launches are exactly the type of projects that these tax provisions are intended to support.”

Companies like SASCO who are innovating, growing and competing are at the heart of the ongoing manufacturing renaissance currently taking place in the United States.  These deductions have allowed SASCO to triple their facility’s capacity over the past four years to keep up with the double digit growth they have experienced annually since 2008. This growth has earned SASCO many accolades including a recent recognition from President Obama’s E-Awards for significant contributions to increasing American exports.

Manufacturers like SASCO need stable, pro-growth, pro-investment tax policy to allow them to face the challenges of competing in a global marketplace. Manufacturers face enough uncertainty and the tax code should not be adding more. We urge every member of the U.S. House of Representatives to support H.R. 4457. Until we can get the full panoply of pro-growth pro-manufacturing tax policies enacted via comprehensive tax reform this is a critical step forward.

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Survey Says… Section 179 and Bonus Depreciation Are Critical

In the latest NAM/IndustryWeek Survey of Manufacturers that was released earlier this morning survey respondents once again underscore the importance of investment incentives like enhanced Section 179 expensing and bonus depreciation and the role that these common-sense provisions play in their firms’ investment decisions. According to the survey, nearly a quarter of respondents said that “they were holding off on making investments until Congress extends Section 179 expensing or first-year bonus depreciation.”

If these provisions were not expensed, over a third of respondents “said that they would not make any investments this year without these provisions.” That would be on top of the 5 percent of respondents that said that they were not planning on making any investment this year at all. As NAM’s Chief Economist Chad Moutray puts it in the survey analysis, “that is a significant portion of businesses that would be negatively impacted by the loss of these investment incentives.

And in a pre-emptive response to those who say that the economy can still benefit when Congress gets around to passing the extenders in the 11th hour during the likely lame duck session later this year, this survey also underscores that the sooner Congress acts to restore these provisions the better. In fact according to our survey, “more than half of those surveyed said there would not be enough time to make capital spending purchases and put these capital expenditures into place if these incentives are not extended until mid-November.”

This survey makes it all the more clear that the House of Representatives should overwhelmingly support the passage of H.R. 4457, America’s Small Business Tax Relief Act later this week. Manufacturers of all sizes need this action and they need it now!

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Who Really Benefits from Bonus Depreciation?

According to a recent paper from the Tax Foundation, the whole economy. Will McBride, the paper’s author, concludes that “extending 50 percent bonus expensing on a permanent basis would boost GDP by over 1 percent, the capital stock by over 3 percent, wages by about 1 percent, and would create 212,000 jobs.”

Here are the NAM, we’re not surprised. Manufacturers know first-hand that capital investment is key to economic growth, U.S. job creation and competitiveness. Promoting investment should be an integral part of U.S. tax policy. And, an effective way to spur business investment and make U.S. manufacturing more competitive is through a strong capital-cost recovery system. An ideal system would allow companies to expense capital equipment in the tax year purchased. First-year expensing lowers the cost of capital, increases the number of profitable projects a firm can undertake and promotes job creation and retention.

This is why we applauded and strongly support Rep. Patrick Tiberi’s recent bill to make 50 percent bonus depreciation permanent, H.R. 4718. We are pleased that it was recently reported out of the Ways and Means Committee and hope that this common-sense bill can come to the floor sometime soon. In the absence of comprehensive tax reform, manufacturers need critical pro-investment tax policies enacted permanently to allow them to plan for future investments. Expensing is not just a matter of timing, by reducing the after-tax cost of investment, policies like permanent Section 179 and permanent 50 percent bonus depreciation allow manufacturers to stretch critical resources and make the investments they need to compete in today’s competitive marketplace. We applaud Rep. Tiberi for his leadership on these efforts and urge swift adoption of both of these provisions and allow U.S. manufacturers to grow and lead way to a full economic recovery.

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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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NAM Applauds IRS Reconsideration of Flawed Rule Limiting Speech

The IRS has announced it will revisit its proposed rule limiting the types of First Amendment activities in which nonprofit organizations may engage. Perhaps the more than 150,000 comments submitted to the agency from groups across the political spectrum or the bipartisan House vote to stop the IRS from modifying the rules helped them see their error.

The NAM filed comments on the rule outlining our concerns about the broad sweep of this rule which could end up eliminating that ability of nonprofit groups to engage in good government efforts such as nonpartisan get out the vote (GOTV) efforts and voter registration activities. We believe our nation remains strong when job creators exercise their Constitutional rights and speak out about public policies that impact growth and U.S. job creation.

Furthermore, an educated electorate is critical to a well-functioning democracy and nonprofit groups across the political spectrum play an important role in this endeavor.   The Supreme Court repeatedly has recognized that voluntary associations are key participants in the public debate and that government’s attempt to stifle their voice violates the First Amendment.

The proposed IRS regulations offered to put us on a path to weakening those rights—we hope they will take a very different course in the next version of this rule.  Regardless, the NAM stands ready to fight against any further attempt to use tax regulations to restrict political speech and activities that are protected by our Constitution.

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NAM Applauds Introduction of Permanent, Pro-Growth Investment Tax Policy

Kudos to Congressman Pat Tiberi (R-OH) for introducing today a bill to allow companies to write off 50 percent of their capital investment in the year they make the investment. Permanent 50 percent first year expensing (also known as “bonus depreciation”) will go a long way to ensure that companies large and small can make investment decisions based on what’s best for their business’s future and not be paralyzed by the constant on-again and off-again pro-investment tax policies.

The bill also will allow companies that have AMT credits (generally companies in a downturn) to use these credits in lieu of taking bonus depreciation. A recent NAM/IndustryWeek Survey of Manufacturers confirms   that, since the start of 2014, the expiration the “enhanced” Section 179 expensing and “bonus depreciation,” has forced many manufacturers and businesses to the sidelines holding off on investment plans. Capital investment is key to economic growth, job creation and competitiveness. Consequently, promoting investment should be a focus of any tax reform effort and an integral part of U.S. tax policy. The most effective way to spur business investment and make manufacturing in the United States more competitive is through a strong capital cost-recovery system.

The introduction of this bill is a significant step toward making this pro-investment culture a reality in the U.S. and creates a critical bridge to pro-growth tax reform. We applaud Rep. Tiberi for his leadership in this area on behalf of manufacturers and urge the Committee and full House to act on it in the near-term. As our economy continues to struggle to fully recover from the recession we need this type of solid, permanent pro-growth policies in place to unleash our economic potential.

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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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