Tag: R&D Tax Credit

New York Times: ‘Tax Breaks Bring Hope for Hiring’

The New York Times reports on manufacturers’ reaction to the tax compromise moved forward by the Senate on Monday. The story is, “Tax Breaks Bring Hope for Hiring“:

To many manufacturing companies, the tax cut proposal now being considered in Washington may be just enough to spur additional spending and hiring.

At Yushin America, a Rhode Island company that makes and maintains robotic manufacturing equipment, executives say that the business tax breaks would allow them to invest in new machinery, new employees and even a new roof.

“It’s a chance for us to put it back in the business and grow,” said Michael Greenhalgh, operations manager of the company in Cranston, which employs 60 people and has annual sales of about $21 million.

The story quotes the NAM’s Monica McGuire and uses Bison Gear and Engineering in Illinois as a case study of how the tax treatment can spur investment.

Because Bison is organized as a subchapter S corporation, and its income is taxed at its owners’ individual rate, it will benefit if Congress extends the tax break for the wealthy. The company, which has $50 million in sales and 225 employees, will also reap tax savings from the changes in depreciation and research policies.

Ron Bullock, company chairman, said three positions in the research and development staff had been vacant for months as he tried to gauge the strength of the economic recovery and the prospects of a double-dip recession. With the tax savings, Mr. Bullock said, he expects to hire as well as replace aging equipment.

“Other businesses will use their tax incentives to order products from us, which will allow us to hire and, hopefully, expand,” he said. “That’s the way you turn an economy around, and allay the fears people have about whether this economy is a good place to invest.”

Ron is an NAM board member.

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The Tax Compromise is a Good Compromise for Manufacturers

The House Democratic caucus is fuming, but …

From NationalJournal.com, “The Rupture Between House Democrats and the White House“:

Still, the current thinking is that the Senate passes it without amendment, and the House receives it next week  when the U.S. Chamber of Commerce and others, possibly the Business Roundtable and National Association of Manufacturers, weigh in.

If they’re in favor, the pressure will be too great for the Blue Dogs, New Democrats, and wobbly Republicans to resist. But this is a strategy and a chalkboard play that lacks one key ingredient — the football. The lack of a bill makes all of this theoretical.

The NAM already weighed in! Here’s our news release, “Manufacturers: Proposed Compromise on Tax Relief Is a Positive Step for Jobs and Economy.”

And since the article was written, there does appear to be a bill. The Senate Democratic caucus has released the text of legislative language, “The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.”

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Rep. Lee (R-NY): Innovation, Manufacturers Need R&D Tax Credit

Rep. Christopher Lee (R-NY) speaks from his experience as a manufacturer in this excellent column in today’s Politico,U.S. may risk losing race for R&D incentives,” to call for the retroactive extension of the Research and Development Tax Credit.

Before I ran for Congress in 2008, I helped run a business in Western New York. We manufactured motion control components — including motors, actuators, vibration isolators and industrial shock absorbers. Our products are used in the Tomahawk cruise missile, in medical equipment, on rail cars (including the subway system in the Capitol building) and in aircraft.

This gave me experience with the daily challenges U.S. manufacturers face to stay on the cutting edge, create jobs and compete successfully against global competitors. Research and development on innovative new products is critical. It’s no surprise, then, that manufacturers perform half of all R&D in the U.S., according to the National Association of Manufacturers.

So our economic recovery and the future of U.S. manufacturing depend on firms having the right incentives to make vital investments in R&D.

The NAM has prepared a ManuFact fact sheet on the credit, “R&D Tax Credit: Keep Manufacturers Competitive in the Global Race for R&D Investment Dollars.”

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Get Out of Here, You Millionaires, You and Your Jobs! But Leave Your Taxes

Sen. Claire McCaskill (D-MO) and Sen. Lindsey Graham (R-SC) appeared on Fox News Sunday today. Chris Wallace asked both about extending the current tax rates. Sen. McCaskill indicated the Senate Democratic position was shifting from the original proposal — raise tax rates on joint taxpayers earning $250,000 or more — to raising tax rates on joint taxpayers earning $1 million or more.

To drive home the point, she managed to include “millionaire” as a quasi-epithet four times in her first 99 words.

WALLACE: Senator McCaskill, would you support a temporary extension for several years of the Bush tax cuts both for the middle class and for those making more than $250,000 a year?

MCCASKILL: Well, I think we should draw the line in the sand for millionaires. Honestly, with all the talk and the righteous indignation about the deficit, are we really going to hold up tax cuts for all of America just for the millionaires? And I think that’s where we should draw the line.

Our deficit is serious. Anybody who believes that that small tax differential for millionaires is going to make a big difference on job creation hasn’t been paying attention. There’s many things we can do that’s much more stimulative to the economy than taking care of the millionaires.

Class warfare proved such an effective political message in the 2010 campaigns, let’s redouble the rhetoric!

The Wall Street Journal on Saturday published a timely letter from Louis B. Mendelsohn reacting to an op-ed on tax rates by John Engler, president of the National Association of Manufacturers, and Jerry Howard of the National Association of Home Builders, “Tax Hikes and the Small Business Job Machine.”

In his letter, “Create Jobs? I Know How It’s Done,” Mendelsohn relates how he built his software development company founded in 1979 into a multi-million-dollar operation with more than 50 highly compensated employees and customers in more than 125 countries. Indeed, Mendelsohn is President and CEO of Market Technologies, renowned as a pioneer in the application of personal computers and trading software to the global financial markets. He observes: (continue reading…)

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No Budget, No Appropriations, No Action on Tax Increases

John Engler, president and CEO of the National Associaton of Manufacturers, spoke to the NAM’s Board of Directors on Wednesday, assessing the political and economic consequences of the just-recessed 111th Congress. He observed:

You think about elections as sort of a performance review. Congress is going to have a pretty hard time arguing that they deserve to keep their jobs.

Think about this: They didn’t pass a budget. They failed to enact a single appropriations bill. Not one. We’ve got the return to the killer 2001 tax rates – that’s looming. The estate tax is poised to go back up to 55 percent, and we’ve got no R&D tax credit. Other than that …

Judging from his Washington Post column today, Charles Krauthammer must have been in the audience and been inspired by Engler. In “The Colbert Democrats,” Krauthammer notes Congress’ failure to enact budgets and appropriations bills and elaborates:

Congress adjourned without even a vote — nay, without even a Democratic bill — on the expiring Bush tax cuts. This is the ultimate in incompetence. After 20 months of control of the White House and Congress — during which they passed an elaborate, 1,000-page micromanagement of every detail of American health care — the Democrats adjourned without being able to tell the country what its tax rates will be on Jan. 1.

It’s not just income taxes. It’s capital gains and dividends, too. And the estate tax, which will careen insanely from 0 to 55 percent when the ball drops on Times Square on New Year’s Eve.

Nor is this harmless incompetence. To do this at a time when $2 trillion of capital is sitting on the sidelines because of rising uncertainty — and there is no greater uncertainty than next year’s tax rates — is staggeringly irresponsible.

No, Krauthammer really wasn’t in attendance — he’d be welcome at the NAM, to be sure — and really, Krauthammer and Engler are only stating the obvious. The really obvious. The outrageously obvious: Congress failed to act on taxes.

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Global Competition, ‘Outsourcing’ and How Jobs are Really Created

In today’s Wall Street Journal, Craig Barrett and James Moore cut through the heated political rhetoric about “outsourcing” and get right to the heart of the problem—a misunderstanding among some Congressional leaders on how jobs actually are created. In fact, they say, if the Creating American Jobs and Ending Offshoring Act rejected by the Senate this week ever became law, job losses would accelerate and even more companies would relocate jobs overseas.

In their column, “Outsourcing and the 21st-Century Economy” (subscription), Mssrs. Barrett and Moore explain that companies outsource for two reasons:

The first centers on the nature of the global. In today’s world, outsourcing can save companies money, reduce the time it takes to deliver products and services to customers, and provide access to skilled employees unavailable in the U.S. Outsourcing also allows companies to capitalize on incentives offered by foreign governments to attract investment…

The second reason U.S. companies outsource is that our own government pursues policies that drive investment and job creation offshore: excessive taxes, needless regulations, lengthy permit processes, a decreasing supply of U.S. citizens with technical and engineering degrees, and a general governmental misunderstanding of how to support private-sector jobs. For example, taxing new U.S. corporate investment at 35%—when the world average is just over 18%—pushes U.S. companies to invest offshore to increase return to shareholders.

They go on to argue, “Politicians who accuse the business community of being solely responsible for the loss of U.S. jobs are disingenuous at best and urge legislators to “recognize the competitive nature of the 21-st century world economy.”

Manufacturers could not agree more. In fact, NAM’s Manufacturing Strategy for Jobs and Competitive America sets out a roadmap for policymakers. On tax policy, rather than looking at ways to punish worldwide American companies, lawmakers should lower the corporate tax rate, provide a permanent and strengthened R&D credit and advance fair and competitive rules for taxing foreign income of U.S. companies, all changes that will make the U.S. a better place to do manufacturing.

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Sen. Baucus Introduces Tax Extenders Bill

From the Senate Finance Committee, chaired by Sen. Max Baucus (D-MT), “Baucus Introduces Bill to Create Jobs and Extend Family, Worker, Employer Tax Cuts”:

Washington, DC – Senate Finance Committee Chairman Max Baucus (D?Mont.) today introduced fully paid-for legislation to create jobs and extend critical tax cuts for individuals, families and employers, while closing tax loopholes for wealthy investment fund managers and large corporations. The bill would cut taxes for families paying college tuition, state and local taxes, and property taxes. It would cut taxes for employers to spur research and development and investment, freeing up cash to expand and hire new workers. And the legislation would bolster career training programs and provide wage assistance to help employers hire workers to help our economy grow.

The bill features many one-year extensions of current tax programs, exemptions, incentives and the like. For example, the R&D Tax Credit would be extended for one year,  retroactively from the start of 2010.

News coverage …

(continue reading…)

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Facing the Reality of Global Competition with an R&D Tax Credit

The Wall Street Journal last weekend published an op-ed by Tufts University professor Amar Bhidé arguing against the efficacy of the federal research and development tax credit, “Don’t Expect Much From the R&D Tax Credit.”

Bhidé’s argument falls short because he barely acknowledges the global competitive realities faced by manufacturers in the United States, including the growing race for R&D investment dollars worldwide. (It’s an odd oversight coming from a professor from Tufts, an institution with a sterling reputation for studies in diplomacy and international economics.)

Congressional failure to renew the R&D tax credit, which expired last December, would represent a unilateral surrender in this competition. Innovation and jobs would both suffer as companies adjusted their domestic R&D to reflect the U.S. abandoning the race.

A few key facts:

  • In 2009, 21 OECD countries offered R&D tax incentives — 16 of which offered stronger incentives than the United States — compared to just 12 OECD in 1996. This 75 percent increase over 15 years is anything but coincidental, but rather a targeted effort by countries to jumpstart technological advancements and innovations by the private sector.
  • The U.S. share of global R&D has fallen from 39 percent in 1999 to 33 percent in 2007, while China’s share increased fourfold. (Source: Organization for Economic Co-operation and Development, “Ministerial Report on the OECD Innovation Strategy,” May 2010)
  • China surpassed Japan’s ranking in 2009, taking the No. 2 spot behind the U.S. in world R&D spending.

Nearly 18,000 companies use the credit, far more than just the largest companies with large R&D budgets. Indeed, companies of all sizes doing R&D on American soil continue to be courted, in some cases aggressively, by other countries to move their U.S.-based R&D offshore.

The U.S tax credit is available only for research and development performed in the United States. IRS statistics further show that the R&D credit is a jobs credit – 70 percent of the claims made against the credit are for employee salaries.

Manufacturers are keenly aware of the tax credit’s incentives and impact. The manufacturing sector accounts for nearly 70 percent of R&D credit claims and performed 70 percent of all business R&D in the United States. The emphasis is understandable: R&D fuels the innovation that drive new product development and increased productivity — two necessary factors for growth in manufacturing.

The professor’s arguments make might sense in a theoretical setting, but manufacturers live in the real world where many countries are competing for companies that do research and development. From a manufacturer’s perspective, a more accurate title for Professor Bhidé’s op-ed might have been, “Don’t Expect Much if the R&D Tax Credit is NOT Renewed, Strengthened & Made Permanent.”

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Circumnetting the Economy and Congress’ Return

The Hill, “Import ban bill has manufacturers worried,” on H.R. 4678, the Foreign Manufacturers Legal Accountability Act: “U.S. manufacturers and Embassy Row are up in arms over a House bill that would ban imports from manufacturers that don’t have a U.S. agent.”

American Spectator, “A Real Small Business Assist“: [If]  if Obama really wanted to help small business, he would instruct Senate Majority Leader Harry Reid to stop using ‘legislative maneuvers’ to block ‘up or down’ votes on amendments that, unlike the underlying bill, would actually ease the burden of the majority of small businesses. Dozens of amendments have been proposed to the “Small Business Jobs And Credit Act” that would help small entrepreneurs by providing regulatory and tax relief.”

Washington Times, “‘Green’ jobs no longer golden in stimulus: Environmental projects fail to live up to hype“: “Noticeably absent from President Obama‘s latest economic-stimulus package are any further attempts to create jobs through “green” energy projects, reflecting a year in which the administration’s original, loudly trumpeted efforts proved largely unfruitful….The long delays typical with environmentally friendly projects – combined with reports of green stimulus funds being used to create jobs in China and other countries, rather than in the U.S. – appear to have killed the administration’s appetite for pushing green projects as an economic cure.”

Pittsburgh Post-Gazette, “Economy to occupy Congress“: “On the House side, Democrats will continue to push their ‘Make it in America’ agenda — designed as a boost to U.S. manufacturing and an attempt to restore confidence in the economy. “We need to create an environment from a tax standpoint, a regulatory standpoint and a confidence standpoint that we can make it in America,” said Majority Leader Steny Hoyer, D-Md., in a conference call last week, touting private sector and manufacturing job growth as signs of light, despite the nation’s 9.6 percent unemployment.”

Los Angeles Times, “U.S. hard-pressed to stem domestic R&D losses“: “President Obama’s proposal to boost the research tax credit for businesses is widely seen as necessary to bolster American competitiveness in the global economy. But even if the $100-billion plan is approved, it won’t begin to address the fundamental questi n of how to turn that research and new technology into jobs and renewed prosperity for Americans.”

Wall Street Journal, Arthur Brooks and Paul Ryan, “The Size of Government and the Choice This Fall“:  [Finding] the right level of government for Americans is simply impossible unless we decide which ideal we prefer: a free enterprise society with a solid but limited safety net, or a cradle-to-grave, redistributive welfare state. Most Americans believe in assisting those temporarily down on their luck and those who cannot help themselves, as well as a public-private system of pensions for a secure retirement. But a clear majority believes that income redistribution and government care should be the exception and not the rule.”

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Wary, Cautious, Even Skeptical — Manufacturing

A roundup of business reaction to the President’s latest proposals:

Bloomberg TV, “NAM’s Timmons Interview on Obama Tax Policy,” an interview with Jay Timmons, executive vice president of the National Association of Manufacturers:

Margaret Brennan, Bloomberg: In reading these specific proposals, it sounds like the President is nodding toward or taking a page from something that you’ve been asking for a while, and a number of Republicans have here:

Timmons: It actually is a page right from our Manufacturing Strategy and our playbook, and what we think needs to occur to improve our economy and create jobs. The problem is, the tax incentives that the President is talking about – two very, very good incentives – it sounds like those are going to be coupled with tax increases in other areas, which could harmful to business, the economy and jobs. And you can’t fix one problem by creating two others.

Brennan: So what are you talking about there? You’re not talking about the individual tax rate on those making more than $250,000 a year.

Timmons: Well, actually, that is one of the issues. You know, 70 percent of manufacturers – this is a fact that most people don’t know – 70 percent of manufacturers file as individuals or S corporations. Higher taxes on manufacturing will harm their ability to make investments, buy new plants and equipment, even if the other tax incentive that the President is talking about exists. And that hurts jobs, and of course, job creation.

Dow-Jones, “Businesses Wary Of Obama Proposal To Expand R&D Tax Credit“:

The R&D tax credit expired at the beginning at this year, and a proposal to extend it for 2010 have run into a Senate logjam.

“It’s good that the president called for a strengthened credit, but the most important message is that there be no gap in the R&D credit for this year,” said Monica McGuire, a senior director at the National Association of Manufacturers.

Forbes, Brian Wingfield, “Obama, Boehner Show Little Will To Reduce The Deficit“:

What about the president’s other ideas? Wednesday, he also argued for allowing businesses to write-off all of their equipment expenses in 2011 rather than deducting the expenses over time. In addition, he’d make permanent the research and development credit. Business groups like the U.S. Chamber of Commerce and National Association of Manufacturers would normally jump at the idea. But a senior administration official says the R&D credit would be paid for by closing tax “loopholes” on multinational companies–not something business groups are likely to endorse.

Human Events, John Gizzi, “Business Leaders Denounce Obama’s Tax Increase“:

Jay Timmons, vice president of the National Association of Manufacturers, agreed. Referring to the selected tax credits supported by the President, Timmons told HUMAN EVENTS, “At face value, a 100% tax credit for plants and equipment and an expanded tax credit are extremely good for business and the economy and jobs.”

However, he quickly added, “unfortunately, the most effective economic growth tool is an extension of the ’01 and ’03 tax cuts, which the President refuses to do in total. Additionally, it is likely there will be a tax increase included which will raise energy prices and other taxes on business.”

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