It’s no secret to Washington policymakers, our members, the media and, indeed, the general public that the National Association of Manufacturers (NAM) has been leading the charge for pro-growth, pro-competitiveness and pro-manufacturing tax reform for the better part of a decade, a goal that has become increasingly more important with each passing year. Read More
Co-authored by Christine Scullion, NAM Director of Human Resources Policy
For years, the National Association of Manufacturers (NAM) has been urging Congress to do away with the 2.3 percent excise tax on medical device manufacturers stemming from the Affordable Care Act (ACA) that threatens to hinder growth and innovation in this industry. Now, more members of Congress are joining in calling for a repeal of this onerous tax—and fast!
The NAM has always strongly opposed industry- and product-specific taxes, as they serve to inhibit growth in targeted sectors and impede on the ability of companies to compete in the global marketplace. The 2.3 percent tax applies to sales of taxable medical devices starting in January 2013, but thanks to the efforts of manufacturers and our friends in Congress, a two-year moratorium on the medical device tax was enacted. The moratorium runs out at the end of 2017, making swift repeal a priority.
Congressmen Erik Paulsen (R-MN) and Ron Kind (D-WI) have been leaders on this issue and have most recently introduced the Protect Medical Innovation Act of 2017 (H.R. 184) to repeal the medical device tax once and for all. A bipartisan majority of 245 members of the House have cosponsored H.R. 184. As another positive sign of support in the House, Congressman Jim Banks (R-IN) and 17 other members of the House freshman and sophomore class sent a letter to House Speaker Paul Ryan (R-WI) asking that H.R. 184 be put on the fast track toward passage and enactment.
On the other side of the Capitol, Senate Finance Committee Chairman Orrin Hatch (R-UT) and a bipartisan group of nine senators have introduced the Medical Device Access and Innovation Protection Act (S. 108), which also aims to repeal the medical device tax. The NAM strongly supports H.R. 184 and S. 108 and applauds the bipartisan, bicameral support the legislation has received.
While the effort to repeal and replace the ACA will be a considerable undertaking, the NAM is urging Congress to include full repeal of the law’s burdensome taxes on manufacturers, including the medical device tax, “Cadillac” tax and the health insurance tax in the upcoming budget reconciliation bill.
The National Association of Manufacturers (NAM) is pleased that the House will soon be voting on H.J. Res. 41, a resolution providing for congressional disapproval under the Congressional Review Act of a Securities and Exchange Commission (SEC) rule relating to the disclosure of payments by resource extraction issuers (the Section 1504 rule). The existing SEC extraction issuers rule, as finalized, subjects manufacturers to reporting requirements that are overly burdensome and is an impediment to manufacturing growth in the global economy. Read More
Manufacturers continue to face regulatory requirements that are costly and burdensome. Securities and Exchange Commission (SEC) rulemaking stemming from the Dodd-Frank Act is a prime example. The pay ratio and conflict minerals requirements are just a few of the onerous elements facing manufacturers in recent years. Read More
The National Association of Manufacturers (NAM) is releasing in-depth “Competing to Win” policy papers to equip Congress and the Trump administration with blueprints for delivering on manufacturers’ priorities. Today’s release is the second in the series and focuses on tax. For more on the NAM’s “12 Days of Transition,” follow @ShopfloorNAM.
If there is one single issue that could have the greatest positive impact on manufacturing overall, tax reform is likely that issue.
As it stands today, our tax code is dragging down manufacturers and holding us back. We have the highest corporate tax rate in the world, and some small manufacturers that are structured as S-corporations and file as individuals pay tax rates greater than 40 percent, which is absurd.
Our goal needs to be making the United States the most attractive place to manufacture and invest, and we will make great strides in that direction through pro-growth tax reform.
In the NAM’s “Competing to Win” agenda, released in early 2016 and now updated with in-depth policy blueprints, we lay out very clearly the problems and solutions for our elected officials, and we have shared this with President-elect Donald Trump’s transition team.
For manufacturers, a tax reform plan must include:
- Reduced tax rates on corporate and pass-through business income;
- A robust capital cost-recovery system;
- Strong research and development incentives; and
- Modern, competitive international tax rules.
A study released by the NAM in January 2015, titled A Missed Opportunity: The Economic Cost of Delaying Pro-Growth Tax Reform, found that comprehensive tax reform that includes this multipronged pro-growth tax package would substantially grow the economy and result in increased jobs and investment. Over a 10-year period, this pro-growth tax reform plan would:
- Increase GDP by more than $12 trillion relative to Congressional Budget Office projections;
- Increase investment by more than $3.3 trillion; and
- Add more than 6.5 million jobs to the U.S. economy.
Our outdated system is taking a toll on our economy. Just look at recent years’ slow growth, static investment and an employment rate that does not match our growth potential. Manufacturers stand ready to be the solution in generating economic growth that we have not seen in a very long time. We are not just identifying the problems, we are being the solution. After all, when manufacturing succeeds, America succeeds.
To view the blueprint, click here.
This blog is part of the NAM’s “12 Days of Transition” series, an effort to provide the presidential transition team and other Washington policymakers with a roadmap to bolster manufacturing in the United States. Read the other blogs in the series here.
Family-owned businesses and their advocates are watching closely the hearing happening today at the IRS on the so-called “minority valuation proposed regulations.” These proposed regulations, released in August, would alter how families are able to value minority interests in a family-owned company, in some cases resulting in a tax increase of more than 30 percent.
In comments submitted by the NAM and the Family Business Estate Tax Coalition of which the NAM is a co-director and co-founder, we highlighted the numerous concerns manufacturers and family-owned businesses across the economy have about this proposal. Shortly after the release of the proposal, when the potential impact begun to be understood by the business community and as concerns were beginning to be raised, Treasury’s policy team began to assert that the proposal is not meant to reduce the use of minority valuation discounts for lack of marketability and lack of control that are used in determining the value of shares sold to family members in a closely held business. Instead, they were just seeking to target abuses in the valuation discounts utilized by some simply to avoid taxes. However, as the IRS and Treasury teams will hear from the grand majority of the 30 people testifying at today’s hearing, the impact as understood by the tax- and estate-planning community is very different.
Manufacturers appreciate that Treasury is listening and that today’s hearing affords the public another opportunity to weigh in on this rule. However, the negative impact of these proposed regulations on NAM family-owned businesses cannot be overstated. In a recent letter, the third-generation owner of an active manufacturing enterprise explained the potential impact of the regulations:
“Our board has been working an ownership succession plan for years. Stock valuation and financing stock transfer are an ongoing challenge. Stock is transferred through the sales, gifts and redemptions of shares, and the value of the stock is the fair market value at time of transfer. We are within a couple of years of completing the transfer of ownership from the third to the fourth and fifth generations. Our advisers have informed us the proposed regulations will eliminate discounts that have traditionally been applied. If this happens, the cost of transferring the stock will increase by 43 percent. This will put an additional strain on our capital and would lead us to underinvest the capital required to grow or even sustain our company. It means diminished ability to invest in job creating, value creating and value-retaining projects.”
The last line of our member’s letter says it all, and today’s hearing should reinforce what they’ve already heard in the voluminous comments to Treasury, that they should withdraw these proposed regulations and not harm family-owned businesses.
National Association of Manufacturers President and CEO Jay Timmons released the following statement after the nomination of Steve Mnuchin as treasury secretary:
“Manufacturers welcome the nomination of Steve Mnuchin as treasury secretary and his commitment to accelerating economic growth with much needed tax reform. Tax reform that benefits manufacturing workers is one of the most important ways to jumpstart more jobs and opportunities for all Americans.
“Mr. Mnuchin has previously articulated exactly what manufacturers need to compete and win in a global economy: a fairer, simpler and more competitive tax code. That’s what we’ve called for in our ‘Competing to Win’ agenda, and that’s why we look forward to working with President-elect Donald Trump and Mr. Mnuchin to deliver on their promises and make our economy work better for everyone.”
CONTACT: Jennifer Drogus (202) 637-3090
Coming on the heels of Thanksgiving and “Black Friday,” Small Business Saturday is a perfect opportunity for Americans to pause and contemplate the critical role small businesses play in our nation’s economy. Many small businesses are family owned and are responsible for 62 percent of the country’s employment and $5.9 trillion of the nation’s GDP. Often with deep roots, these family-owned businesses play critical roles in the philanthropic and economic heart of local communities. Read More
The National Association of Manufacturers (NAM) applauds the leadership of Rep. Warren Davidson (R-OH) and Sen. Marco Rubio (R-FL) in introducing legislation to prevent the finalization of proposed regulations affecting the transfer of minority interests in a family-owned business. Since these proposed regulations were released in August, there has been a growing concern among small manufacturers about the potential harmful impact of these proposals on the continuity and succession planning of family-owned enterprises. Thousands of manufacturers across the United States are family-owned businesses. These businesses, often in their second and third generation, are at the heart of the manufacturing supply chain and are a critical piece of the economy.”
The proposed regulations purport to address what Treasury believes to be abusive tax planning. In reality however, as more than 3,800 family-owned businesses and trade associations representing these businesses expressed in an NAM-led letter sent to Treasury last week, “the proposed guidance is one of the most sweeping changes to estate tax policies in the last 25 years and would be detrimental to active enterprises and family-owned businesses that employ millions of workers throughout the nation.” While most taxpayers applaud efforts to target abuses in the tax system, if the proposed regulations are not corrected, they have the potential to threaten “the ability of families to pass businesses on to the next generation of owners.” Manufacturers applaud the leadership of these members in introducing this legislation and will continue to work to protect family-owned manufacturers so that they can continue to compete and succeed.
A group of nearly 50 Ohio companies, including a number of manufacturers, sent a letter to Treasury today about the negative impact the proposed Section 385 regulations are already having on businesses. In the letter, the Ohio companies warned that the regulations, if finalized in their current form, would “significantly impede the ability of our businesses to invest and create jobs in Ohio.”
The letter echoes sentiments the National Association of Manufacturers (NAM) has shared with the Treasury Department in meetings, testimony and comment letters about the uncertainty, costs and compliance challenges posed by these proposed debt/equity rules. The NAM has also taken this message to Capitol Hill, where manufacturers continue to brief congressional staff on the serious strain these regulations would have on manufacturers’ corporate finance operations, if the rules are not withdrawn or, at a minimum, significantly modified. Read More