H.R. 4853 Archives - Shopfloor

Tax Compromise: Signing Ceremony and Manufacturing’s Reaction

By | Economy, Small Business, Taxation | One Comment

From President Obama’s comments at the bill signing ceremony Friday for H.R. 4853, the tax compromise:

This bipartisan effort was prompted by the fact that tax rates for every American were poised to automatically increase on January 1st. If that had come to pass, the average middle-class family would have had to pay an extra $3,000 in taxes next year. That wouldn’t have just been a blow to them — it would have been a blow to our economy just as we’re climbing out of a devastating recession….[snip]

And millions of entrepreneurs who have been waiting to invest in their businesses will receive new tax incentives to help them expand, buy new equipment, or make upgrades — freeing up other money to hire new workers.

Putting more money in the pockets of families most likely to spend it, helping businesses invest and grow — that’s how we’re going to spark demand, spur hiring, and strengthen our economy in the New Year.

Senate Republican Leader Mitch McConnell (R-KY), who attended Friday’s ceremony and who took the lead in gaining the tax concessions from the President, a Senate floor statement:

I’m pleased to report two pieces of good news out of Congress today. After two years of policies that lacked public support, the tide is beginning to turn.

Today the President will sign a bill that ensures no American gets a tax hike on January 1. Republicans have fought hard for this legislation. Up until last week, most Democrats resisted. But in the end the American people were heard. And that’s a welcome change from the past two years.

The other piece of good news, McConnell said, was Senate Majority Leader Reid’s decision to withdraw the 1,924-page, $1.2 trillion omnibus bill.

The absence of Reid and Speaker of the House Nancy Pelosi prompted much commentary in the blogosphere, as in the Politico piece, “Pelosi and Reid skip bill signing.” Robert Costa of National Review Online has an informative report on the ceremony, “A Tax Deal, and Rev. Al,” a reference to Al Sharpton’s attendance.

Executive Vice President Jay Timmons of the National Association of Manufacturers issued a statement, “Manufacturers: Tax Relief Will Spur Economic Recovery and Job Growth.”

And coverage/commentary with a manufacturing focus:

Rep. Camp Highlights Business Support for Tax Compromise

By | Economy, Taxation | No Comments

Rep. Dave Camp (R-MI), the next chairman of the tax-writing House Ways & Means Committee, kindly mentioned the National Association of Manufacturers and other business trade associations in his floor remarks Thursday in support of H.R. 4853, the tax compromise. Excerpt:

Let’s be clear – this is a bill about taxes – long standing tax policy for that matter – and preventing a tax hike. It isn’t about spending. Over 90 percent of this bill is tax policy – and that policy is aimed at preventing a tax hike for families and employers or providing direct tax relief to American workers.

It also protects family farms, ranches and businesses from being hit by a destructive “Death Tax” that will go as high as 55 percent next year. Instead, this bill reduces that rate to 35 percent while increasing the exemption amount from $1 million to $5 million.

Now, I know $1 million sounds like a lot of money – and it is. But think about the family farmers in your districts, think about the cost of the big machinery it takes to operate and manage their lands – some of the combines I see every day in my district cost a quarter-million dollars each! That isn’t cash in the bank; that is equipment in the field and the federal government has no right to take half of it when mom or dad passes on. While I support a total repeal of the Death Tax, at least this bill makes significant improvements to the Estate and Gift taxes, and it deserves our support.

Members should also know and the American people should know that this bill does not contain “new” policy. New provisions were not snuck in late at night or behind closed doors. We took a firm stand against new policy. As a result, over 70 provisions – some of them my own – were excluded from this bill – well over $100 billion worth.

NPR interviewed Camp earlier this week, “New Chairman Of House Tax Panel Seeks Spending Cuts.”

With Tax Compromise, Manufacturers Find Reason to Hire, Invest

By | General, Small Business, Taxation | One Comment

Enactment of H.R. 4853, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, falls short of creating the tax certainty that could improve U.S. global competitiveness, but it is still a reasonable, very positive compromise that helps prevents economy-stomping tax increases that would have otherwise hit on January 1, 2011.

President Obama will sign the bill this afternoon, moving with alacrity (and probably to boost weekend retail spending).

The National Association of Manufacturers had sent both Senators and House members “Key Vote” letters expressing strong support for the legislation on the basis of extending the 2001/2003 tax rates, the “business extenders” including the R&D tax credit, and the compromise that stopped the estate tax from returning from a confiscatory 55 percent rate.

The measure of certainty and investment incentives — including President Obama’s proposal for 100 percent expensing of capital investments — will encourage manufacturers to expand and hire.

Margins of victory last night in the House — by a vote of 277-148 — and previously in the Senate — by a vote of 81-19 — were much larger than most observers had originally expected. But the consequences of inaction would have been so economically destructive that  members of both parties found the legislation the only realistic course of action before them. We don’t begrudge others their ideological commitment or reasoned arguments, but this was THE realistic compromise.

House Majority Leader Steny Hoyer (D-MD): ” Ladies and gentlemen, there probably is nobody on this floor who likes this bill; and therefore, the judgment is: Is it better than doing nothing? Some of the business groups believe that it will help. I hope they are right. Not only do I hope they are right, I hope if we pass this bill that they respond and create the jobs that we know they have the resources to do.  This is a jobs bill, in my view, which is why I will vote for it. It could be a better jobs bill if we invested the money that we are giving to the wealthiest in America in job growth. It is a bill that will help those who have been unemployed week after week after week and whose angst has grown and grown and grown.”

House Republican Leader Rep. John Boehner (R-OH): ““With nearly one in 10 Americans out of work, acting to ensure no American’s taxes go up on January 1st was critically important.  Failing to stop all the tax hikes would have destroyed more jobs and deepened the uncertainty in our economy.  Stopping all the tax hikes is a good first step in our efforts to reduce the uncertainty family-owned small businesses are facing, but much more needs to be done, including cutting spending, permanently eliminating the threat of job-killing tax hikes, and repealing the job-killing health care law.  These are critical priorities the new majority has pledged to act on in the next Congress, and I hope President Obama will listen to the American people and work with us to stop Washington’s job-killing policies.”

The Realities of the Estate Tax, the Reasonable Compromise

By | Economy, Small Business, Taxation | 2 Comments

House leadership has pulled the rule for consideration of H.R. 4853, the tax compromise, over liberal Democratic members’ unhappiness with how it would deal with a separate vote on the estate tax. The confusion may delay a final vote on the bill. (Reuters, WSJ blog.)

The delay allows us the opportunity to post the transcript from last night’s PBC NewsHour, which featured a debate over the estate tax between Rep. Kevin Brady (R-TX) and Rep. Earl Pomeroy (D-ND), the chief House backer of the higher tax rates. Brady did a good job of cutting through the rhetoric. Like the manufacturers, Brady supports a permanent repeal of death tax but regards the tax bill’s provisions as a compromise.

REP. KEVIN BRADY: Well, I think the death tax is wrong, and as close to a moral — immoral a tax as we have.

There’s something wrong about family farmers, family-owned businesses working their whole life to build up a nest egg, some of them working generations to do that, and then when they die have the government swoop in and take as much as half of everything that they have earned.

I think the death tax needs to go away permanently. Short of that, I think the common ground that was reached that exempts a lot of our family farms and family-owned businesses and taxes others at a 35 percent rate, that wasn’t created, that number didn’t come up from Washington.

That came from our local farmers, our local small business people, our local newspapers and grocery store owners, who said, if you can’t eliminate it completely, this will allow many of us to survive.

So I think that common ground is what we ought to stick with. And I don’t think 45 percent — I don’t think the government deserves half of what our hardworking Americans spent their life to build up.

And … Read More

The Estate Tax, a Significant Compromise

By | Economy, Small Business, Taxation | One Comment

The House is now debating H.Res. 1766, the rule for consideration of H.R. 4853, the tax compromise. Opponents have adopted — in some cases, for the first time — budget deficits as their defining political principle, while in the case of the estate tax indulging in some of the most bellicose class warfare rhetoric we’ve heard all session.

The argument against the estate tax compromise, that is, for welcoming the return of the full 55 percent estate tax rate with just a $1 million exemption, boils down to, “Wealthy! WEALTHY! Tax breaks for WEALTHY! Bad! WEALTHY!”

The National Association of Manufacturers has sent a “Key Vote” letter to the House calling for final passage of H.R. 4853. On the estate tax, the NAM’s Executive Vice President Jay Timmons wrote:

[NAM] members have consistently called for repeal or significant reform of the estate tax. We believe that the estate tax language passed by the Senate yesterday, which calls for a 35-percent tax rate and a $5-million exemption, represents significant reform. However, the estate tax provisions included in the amendment offered by Representative Pomeroy do not provide the reform needed to relieve manufacturers from the estate tax burden.

For small and medium-sized manufacturers (SMMs), business owners and families, the estate tax is more than a one-time tax. In a 2009 survey of our SMM members, respondents said they spent, on average, $94,000 annually on fees and estate-planning costs in preparation for their estate tax bill. This is money that could have been used to grow businesses and add jobs. Many small manufacturers and small businesses are seriously and adversely impacted by the estate tax. Higher rates lead to job loss.

The NAM has also prepared a ManuFact fact sheet on the anti-investment impact of the estate tax, AKA the death tax. It includes a fact we have not seen noted elsewhere lately: “According to the Joint Economic Committee (JEC), the death tax costs the economy more than it adds to federal revenues. It has generated $761 billion since 1942 while reducing the stock of capital in the economy by $847 billion. The May 2006 study by JEC, ‘Costs and Consequences of the Federal Estate Tax,’ found no compelling reason to continue to collect the tax and several compelling reasons to reduce or abolish it.”

NAM Key Votes are identified by a committee of NAM member companies of all sizes and are used to determine a member of Congress’ record on manafucturing issues.

Senate Approves Tax Package by 81-19 Vote

By | Economy, Small Business, Taxation | One Comment

The vote on H.R. 4853 (or more precisely, the motion to concur in the House amendment to the Senate amendment with Amdt. No. 4753 to H.R. 4853) was 81-19 in support. The margin of victory should provide momentum for passage as the House takes up the bill Thursday.

This is good legislation, a compromise with many more plusses than minuses in terms of jobs and economic growth. As the National Association of Manufacturers’ “Key Vote” letter in support of the bill summarized:

Manufacturers strongly support extending the 2001/03 tax relief to all Americans. Over 70 percent of U.S. manufacturers file as S-corporations or other pass-through entities; most would be significantly and adversely impacted by the higher tax rates that will take effect without congressional action. The non-partisan Congressional Budget Office estimates that fully extending the 2001/03 rates would add between 600,000 and 1.4 million jobs in 2011 and between 900,000 and 2.7 million jobs in 2012. Moreover, lower tax rates on capital gains and dividends will boost capital investment and economic growth.

The NAM has consistently called for repeal or significant reform of the estate tax. For small and medium-sized manufacturers (SMMs), business owners and families, the estate tax is more than a one-time tax. In a 2009 survey of our SMM members, respondents said they spent, on average, $94,000 annually on fees and estate-planning costs in preparation for their estate tax bill. This is money that could have been used to grow businesses and add jobs.

Renewal of the research and development (R&D) credit and other business extenders is critical to manufacturing competitiveness and should be extended. Manufacturers claim nearly 70 percent of the R&D credit, and R&D fuels innovation that translates into new products, increased productivity and jobs. Similarly, extension of deferral for active financing and the look-through rules will help U.S. competitiveness. Other extenders promote energy efficiency and make permanent important employer-provided education assistance. Moreover, the 100-percent expensing provision will create a positive ripple effect in the economy by encouraging investment and creating demand for machinery and equipment.

Update: From The Business Journals, “U.S. Senate approves Obama tax-cut deal“:

“The bill is a good first step to eliminate much of the uncertainty that has been holding back investment and job creation by manufacturers and the broader business community,” said Jay Timmons, executive vice president of the National Association of Manufacturers.

On Taxes, a Clear Senate Vote for Extensions, Against a Tax Increase

By | Taxation | 4 Comments

The U.S. Senate on Monday voted overwhelmingly for the Obama-Republican (now with the Senate Democrats, too) compromise on taxes (H.R. 4853), invoking cloture on the motion to proceed by a vote of 83-15. The National Association of Manufacturers had supported the motion through a “Key Vote” letter, and NAM Executive Vice President Jay Timmons issued a statement lauding the Senate vote: “Our country’s unemployment rate remains historically high, and now is not the time to raise taxes on small businesses who are the job creators.”

The Senate reconvenes at 10 a.m. today, with a vote on final passage possible today. House Democrats are making noises about changing the estate tax provisions — 35 percent with a $5 million individual exemption — which is already a major compromise. That could be disastrous politically and economically. Portfolio.com, “Tax Cut Deal Headed to a Vote“:

Changing the estate tax provision could jeopardize Republican support for the bill, however, since the lower estate tax rate was part of the deal they negotiated with Obama. Most business groups contend that high estate rates and low exemptions hurt family-owned businesses.

The estate tax is “a huge issue” for many manufacturers, said Dorothy Coleman, vice president of tax policy for the National Association of Manufacturers.

This Gift-Wrapped Tax Increases Comes With an Extra Bracket

By | Taxation | No Comments

Here’s a strange and likely little noticed provision included in H.R. 4853, The Middle Class Tax Relief Act of 2010. The bill, sponsored by House Ways and Means Chairman Sander Levin (D-MI), permanently extends tax rates for those making under $250,000 – de facto raising taxes on those making over $250,000. But, it also goes one step further and creates a whole new tax bracket of 36 percent – increasing the number of brackets from six to seven. Why you ask?

Democrats have promised not to raise taxes on those making under $250,000, but the current bracket of 33 percent kicks in at $209,000. Yikes! What’s a politician to do? President Obama proposed a simple expansion of the 28 percent bracket, giving a tiny break to those who fell into the crack. But that was just a bit too generous for Chairman Levin. So, he created an entirely new 36 percent tax bracket for that narrow window of income.

So much for the Christmas spirit, eh?

The National Association of Manufacturers this morning sent a “Key Vote” letter to the House opposing the bill. That letter is here, and the NAM’s statement is here.