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Yet Another Reason Congress Should Act ASAP on Tax Extenders

By | Taxation | No Comments

Manufacturers continue to tell Congress that failure to renew the expired tax provisions typically contained in the “tax extenders” package creates unnecessary uncertainty and sidelines business investments. Now, even the agency responsible for carrying out U.S. tax laws is joining the debate.

Stating he is “concerned” that Congress will likely not approve paper editing writing a tax extenders package until later this year, John Dalrymple, the IRS deputy commissioner for services and enforcement, said this week that he hopes Congress will pass extenders as soon as possible to give the agency enough time to make the necessary systems changes for the tax filing season.

The NAM has long been pushing Congress to act ASAP to renew the expired tax provisions since the absence of the R&D tax credit, enhanced Section 179 expensing, bonus depreciation and other important tax incentives are having a negative impact right now. Without these incentives in place and without a clear view of when and for how long they will be renewed at http://samedayessays.org/essay-writer/, manufacturers cannot incorporate new investments into their future business plans. Since investments translate into production and expansion, every day that goes by without these incentives in place is a missed opportunity for growth in manufacturing and in turn, the U.S. economy.

The House has already acted to make permanent several pro-manufacturing tax provisions typically found in the extenders package, but the Senate has not yet passed their extenders bill, the EXPIRE Act. Earlier this year, the NAM joined over 150 organizations in writing to Senators in support of the bill, and continues to meet with Congress to urge that the expired tax provisions be reinstated as soon as possible. After all, eight months is far too long for the U.S. to be sitting on the sidelines while our global competitors of research paper writing service to incentivize productive business investments.

Camp and Brady Talk Tax Reform in D.C.

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It’s no secret that our tax system is broken and in desperate need of reform. Tax reform is a key priority for manufacturers in the U.S. and we have been working closely with policy makers to make it a reality.

Today, Rep. Dave Camp (R-MI) and Rep. Kevin Brady (R-TX) spoke to audiences about the future of tax reform.  Representative Camp, Ways and Means Committee Chairman, spoke at an event hosted by RealClearPolitics about his ongoing efforts to implement comprehensive reform.  Chairman Camp’s introduction of a comprehensive bill has been a major step forward in a painstaking but critical process. Manufacturers appreciate his commitment.

Until we see a reformed tax code, the current system will continue to be an anchor on manufacturers.

Echoing this message to members of the business community at Microsoft’s D.C. headquarters, Rep. Brady, a Ways and Means Committee member, urged for a stronger pro-growth and pro-investment tax policy.  Rep. Brady, in addition to his support for comprehensive reform, has been a tireless advocate of a strengthened and permanent R&D credit.

In order to support a strong and competitive environment for manufacturers in the U.S., the passage of federal tax extenders for tax reform policy is crucial.  Tax credit extensions are the means to providing open avenues for manufacturing success.  In recent weeks, the House and Senate have begun to move in the right direction, passing extensions of the R&D tax credit, bonus depreciation, and Section 179 expensing.

The NAM has vigorously beaten the drum in support of tax credit extenders as a bridge to comprehensive tax reform.  We will continue to do so in order to keep investment, job creation and growth moving.

Tax Extenders Renewal Gains Momentum

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The temporary tax provisions that typically expire every year or two, e.g. R&D tax credit, got a boost of bipartisan, bicameral energy this week with Senate Majority Leader Harry Reid (D-NV) attempting to advance on the Senate floor tax extenders bill S. 3521 and House Ways and Means Committee chairman Dave Camp (R-MI) echoing support for moving some of these tax provisions during the upcoming Lame Duck session. Congressional leaders and tax-writing committee leaders were not the only lawmakers this week calling for action to renew tax extenders. Yesterday, 50 House GOP freshmen signed a letter of support and call for action on tax extenders to Chairman Camp and House Ways and Means Subcommittee chairman Pat Tiberi (R-OH), who held two hearings this year to evaluate the merits of some tax extenders.

In the NAM statement submitted for Rep. Tiberi’s June hearing, key tax extenders important to manufacturer were highlighted along with their impact on innovation, competitiveness, and jobs. The NAM commends tax law writers for their thoughtful review of these tax provisions and their intended goal to renew some of them before yearend.

Here in the city that is the heartbeat of American politics and it seems that everyone has caught Washington Nationals fever. In keeping with that enthusiasm, tax extenders legislation that was in the minors earlier this political season has now just been called up!  Stay tuned for the Lame Duck session.

When it comes to the “2013 Fiscal Cliff,” It’s A Matter of Simple Arithmetic

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At at the end of the year the top dividend tax rate (roughly 25% of all dividends earned) will rise from 15% to 43.4% which has manufacturers very concerned. This rate change reflects the expiration of the 2001/2003 tax cuts, which lowered the rate from 39.6% percent to 15%, as well as the new additional 3.8% surtax under the Affordable Care Act of 2010. This will be the single largest dividend tax hike in history!

This is bound to have an impact on the stock market. In a May 4th Op-Ed that appeared in the Wall Street Journal, Donald Luskin concludes that if no action is taken by Congress, the stock market is set to fall by at least a whopping 30%. According to Luskin, it all comes down to simple arithmetic – when the tax rate goes up, the after-tax yield goes down thereby causing the stock price to fall.

Manufacturers are concerned about the effects of this tax increase, and with good reason. The rate change will impact the entire market, as companies that do not pay dividends may still be priced with the expectation that dividends will be paid in the future.

And who stands to lose? Corporations and shareholders of all incomes, including retirees, pension plans, etc. While we often hear high taxes on investment income will only affect the wealthy, the reality is that all shareholders will be hurt, as corporate dividend payouts are reactive to the dividend tax. Let’s also not forget that dividends are only paid to shareholders after a corporation is taxed on its profits. 

If lower rates for investment income are allowed to expire, the cost of capital will increase, investment will lag and manufacturers in the U.S. will find it harder to create jobs and effectively compete in the global marketplace. Manufacturers are urging Congress to address this issue soon and restore confidence to investors, or we will all be experiencing the negative market effects come January 1st, 2013.

Emily Sternfeld is a policy associate, National Association of Manufacturers.

Taxwriters Agree That “On Again, Off Again” Extenders Leave Taxpayers Up in the Air

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“Uncertainty” was the buzz word at today’s House Ways and Means Select Revenue Measures Subcommittee hearing on tax extenders. At the hearing, which focused both on provisions that that expired at the end of 2011 and those set to expire at the end of 2012, Democrats and Republicans alike said that repeated expirations of temporary tax provisions breed “uncertainty” for both individual and corporate taxpayers that needs to be addressed. Subcommittee Chairman Pat Tiberi (R-OH) summed it up well in his opening statement: “[W]ith a few exceptions, temporary tax provisions that are worthy should be made permanent.” Manufacturers agree that worthy extenders should be made permanent and we put several provisions in that category including the R&D tax credit, deferral for active financing income and  the look-through rules for controlled foreign corporations (CFCs). 

There is real world cost to letting these tax provisions lapse. For example, the on-again, off-again U.S. R&D credit encourages companies to look into relocating U.S. R&D projects to countries offering more generous and permanent research incentives. Foreign direct investment in the U.S. takes a hit, too, as the U.S. is less attractive to R&D-intensive foreign-owned companies evaluating where to perform their research activity. 

We commend the many members of Congress who are interested in reform our nation’s out-dated tax code. This effort is going to take time and, until it’s done, these proven pro-growth, pro-manufacturing, pro-job tax incentives should be renewed sooner rather than later. We hope taxwriters can build on the bipartisanship evident at today’s hearing and act to restore these sound tax provisions to provided badly needed tax certainty for business taxpayers as soon as possible.

Now’s the Time for Congress to Switch the Extenders Back On!

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A bipartisan package of key tax incentives important to manufactures has been in limbo since early this year as Congress drags its feet in extending these temporary “extenders.” Like a yo-yo, these on again, off again nature of these tax provisions undermines the goal of these incentives to drive competitiveness, innovation and job growth. For example, with deferral for active financing on hold, U.S. manufacturers that provide financing for overseas sellers are penalized with a tax that their foreign competitors do not incur. And this makes it more difficult for them to provide competitive financing for potential customers. Moreover, unlike our competitors, our country has been without an R&D incentive for almost three months. This is not news to other countries.  In fact, just two days ago Canada ran a half page, full color ad in the Washington Post bragging that its “…R&D incentives are among the most generous in the world.”

These and other temporary tax provisions help manufacturers invest, grow and retain U.S. jobs. During an exchange last week on the floor of the Senate between the Democrat and Republican leadership of the Senate and the Finance Committee, there was rare, bipartisan agreement that the now expired tax extenders are causing uncertainty to individual and business taxpayers and should be renewed sooner rather than later. We couldn’t agree more.  While we wait for comprehensive tax reform, Congress should renew quickly the bipartisan-supported tax extenders that benefit manufacturers, their customers and their supply chains while spurring growth in the economy and jobs.  Restoring tax certainty will go a long way to boosting our fragile economic recovery.

Business Coalition Weighs in on Need for Tax Extenders

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Once again a number of important tax incentives are scheduled to expire on December 31st, 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.

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.

In Tax Compromise, Business Extenders are NOT Earmarks

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Ryan Ellis, tax policy director at Americans for Tax Reform, has put together an excellent summary sheet that clarifies what business extenders are, why they belong in the tax extension compromise before Congress, and why they are NOT earmarks.

From “Why Business Extenders in the Tax Deal Aren’t Earmarks, TARP, Pork, Etc.“:

  • Business extenders are various deductions and credits which have been in the tax code for many years. There is nothing special or different about them.  They are deductions and credits in the same way the student loan interest deduction is.  The only difference is that Congress puts an expiration date on these deductions and credits so that a “must-pass” legislative tax vehicle is manufactured every year or two.
  • Business extenders are far from ideal tax policy, as are permanent deductions and credits such as the student loan interest deduction, the state and local tax deduction, and many others.  On the merits, they should not exist in a broad-base, low-rate tax code.
  • However, American employers face the highest corporate income tax rate in the developed world (40 percent with states). These business deductions and credits are what make this confiscatory tax rate tolerable.  Getting rid of them is a good idea, but only in the context of fundamental tax reform that is revenue-neutral and lowers marginal tax rates.
  • Tax extenders are not earmarks, etc. The invectives applied to them are more properly applied to spending programs.  Only spending programs can be pork, earmarks, or bailouts.  Letting people (or, in this case, employers) merely keep their own money is not “spending money on them.”  In order to think that it is, you have to assume the government has a right to all their money in the first place, and by letting companies keep some of it, they are getting money spent on them.  That’s absurd, and hardly correct tax policy from a conservative perspective.
  • The extenders in question total $55 billion in tax relief out of a total of
    $801 billion in tax relief.  As a percentage of the entire package (7 percent) the amount of attention they have received has been disproportionate.
    Congress has approved preventing these tax hikes from happening dozens of times over the past decade.  They simply are not new or controversial.
  • The whole point of this tax deal is to prevent taxes from going up on anybody.  It would be wrong to leave American employers with a tax increase at a time of nearly 10 percent unemployment. Congress should avert this tax hike on employers.
  • Ryan’s right.
    In November, the National Association of Manufactures and 1,284 other business groups and businesses signed a letter calling for an extension of the business tax provisions. The gist:

    We urge Congress to pass legislation in the lame duck session to extend critical tax provisions that, while temporary in nature, are critical to our economy. It is of the utmost importance to all of us, and to the health of the U.S. economy, that this extension be enacted before the end of the year and apply seamlessly, at least through 2011.

    Expiration of many of these provisions has already caused job losses, and the uncertainty around their extension will lead to further dislocations just as the fragile economic recovery is beginning.

    The Tax Compromise is a Good Compromise for Manufacturers

    By | Small Business, Taxation | One Comment

    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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