Dorothy Coleman, the NAM’s Vice President of Tax and Domestic Economic Policy, brought manufacturers’ support of pro-growth tax reform to a panel discussion, hosted by Politico today, which featured a variety of policy officials in Washington, D.C. talking about the impact of tax policy in the energy sector.

As consumers of one-third of our nation’s energy, manufacturers have a lot at stake when it comes to tax and energy policy. The conversation touched on a wide variety of topics but it was clear that a need for pro-growth tax policy that doesn’t pick winners and losers is a fundamental aspect of reforms. We want to ensure that the U.S. is the best place in the world to manufacture and raising taxes on energy companies, who require massive capital investment to develop resources, will only undermine that goal.

Some of the panelists suggested the implementation of a carbon tax as potential reform, but Mrs. Coleman quickly refuted those calls, saying that the revenue gains were far outweighed by the economic devastation that would ensue – loss of jobs, wages, higher prices and a less competitive America.

Panel discussions like the one held today help shape the way tax reform is done – and just like today, the NAM will remain at the center of the conversation.

House Ways & Means Chairman Dave Camp (R-MI) normally wields the gavel during House committee hearings, but today brought an unusual role for him – witness. Chairman Camp appeared before the House Small Business Committee to talk about the impact of tax reform on small businesses. With two-thirds of manufacturers paying taxes at the individual rate, the NAM was rather interested in what Mr. Camp had to say.

As you might expect from his record as Chairman, Camp had a lot of positive things to say about the important role small business plays in job creation and economic growth. All true statements, but what caught our attention was his commentary on how small to medium sized manufacturers will be adversely affected without comprehensive reforms. Manufacturers have been telling policymakers for a long time that without a simpler, fairer code that reduces the tax burden, we’re going to see any growth come to a grinding halt. Money sent to Washington is money that cannot be put into hiring workers, expanding production and growing their operations.

Clearly Chairman Camp gets manufacturers’ message and we appreciate his continuous efforts to move forward with comprehensive tax reform. The question is – how many other policy makers truly understand the economic boom that would be unleashed if they put a pro-growth tax system into action?

At first blush, Manufacturers were somewhat optimistic about the framework for business tax reform the President laid out today in the fiscal 2014 budget plan he sent to the Hill. While NAM is firmly behind comprehensive, that is business and individual, tax reform, we thought maybe the President’s plan for business tax reform could help jump start a broader debate.  And frankly, it’s hard for manufacturers to criticize most of the broad tax reform goals the President laid out: eliminate loopholes, broaden the base and cut the corporate tax rate; strengthen manufacturing and innovation; strengthen the international tax system; simplify and cut taxes for small businesses; and restore fiscal responsibility and not add to the deficit. And when we looked at more specifics of the budget, we were pleased to see that at least two provisions important to manufacturers—a strengthened and permanent R&D credit and permanent expensing for small businesses were part of the plan. Unfortunately, the good news ends here.

Let’s turn to the Administration’s goal to “strengthen international tax rules.”  We’re embarrassed that we thought “strengthen” meant improving our outdated worldwide system.  We were wrong. The President’s idea of strengthening means imposing some $157 billion in new taxes on American worldwide companies, actually making our uncompetitive, antiquated system worse than it is. That’s certainly not going to help U.S. manufacturers or any U.S. company struggling to compete in a global marketplace. Nor will manufacturing be strengthened by imposing some $44 billion in new taxes on energy companies. Manufacturers use about 1/3 of our nation’s energy.  New taxes on energy producers will increase energy costs for consumers and discourage the type of investments in new sources of energy in recent years that have been a “game changer” for manufacturers and other energy consumers.

We also were confused that cutting taxes for small businesses is an element of the President’s tax reform framework since the budget itself includes a slew of tax increases targeted to individual taxpayers that also will hit many of the almost two-thirds of manufacturers that operate as “S corps” or other ”flow through” entities. And how do you explain to the many family-owned small businesses—including a number of manufacturers— that their hard-won permanent estate tax relief signed into law by the President in January now is temporary. Five years from now the estate tax rate will go up and the exemption will go down.  That’s the kind of change that not only results in a higher tax bill but also higher planning costs and more uncertainty.

Frankly, we’re also puzzled with the number of new tax incentives included in the budget plan given that “broaden the base” tops the list of priorities in the President’s tax reform framework.  Manufacturers know firsthand how difficult it is going to be to agree on base broadeners. Adding more to the mix will only make that effort more difficult. And while we’re on base broadening, we’re concerned that the President identifies roughly $300 billion “revenue changes and loophole closers” either as part of the reserve for revenue neutral business tax reform or to offset other parts of his budget. This creates winners and losers before we even begin the debate on tax reform. And more importantly, and as we’ve said many times before, piece-meal changes or repeal of long-standing rules outside of tax reform will inject more uncertainty into business planning, making U.S companies even less competitive and threaten economic growth and U.S. jobs.

Sometimes the ranking of #1 is a dubious distinction… surely no one wants to be #1 on the “worst companies to work for” list, the “worst Super Bowl Commercial” list, the “worst movie of all time” list or the “worst dressed” list, but one year after Japan’s corporate tax rate cut went into effect, the U.S. continues to be home to the highest corporate tax rate in the world.

We live in a competitive world. Everyone, from executives, to states, to countries, wants to be able to compete for investment and jobs – and that is all the more true in the aftermath of the great recession. Yet, a year after reaching this “pinnacle” of worst tax policy, nothing has changed.

The NAM has long advocated for comprehensive pro-growth, pro-job tax reform that will result in a permanent competitive tax code that will allow the U.S. to compete with our peers around the world. As articulated in in the recently released Growth Agenda, “The United States needs a comprehensive plan for economic growth. A bipartisan commitment in Washington to pro-growth policies will make our nation a more competitive place to do business.”  At the heart of this plan is an updated tax code and to improve our competitiveness, it is essential that the United States overhaul its tax system at the corporate and individual levels – something that has not been undertaken in nearly 30 years.

Manufacturers have applauded the stated commitment of the Chairmen of the Congressional tax writing committees – the House Committee on Ways & Means and the Senate Finance Committee – to undertaking comprehensive tax reform. We have high hopes that under the leadership of Chairman Dave Camp (R-MI) and Chairman Max Baucus (D-MT) respectively, the Committees will succeed in this effort this Congress. And we continue to weigh in with both committees as to what manufacturers believe must be included in any comprehensive tax reform plan to make it competitive for manufacturing which at the heart must include creating a national tax climate that enhances the global competitiveness of manufacturers in the United States and the avoidance of policy changes that would increase the tax burden on the manufacturing sector, discouraging job creation and investment. (continue reading…)

Tonight’s debate took on a very different format, and a very different tone from the first debate. It was much more combative with the candidates painting very different pictures of their vision for economic recovery and manufacturing growth.

Both President Obama and Governor Romney spoke early and often in support of growing manufacturing jobs in the United States. While it’s good to hear the support, it is incredibly important to implement policies that will not just lead to recovery, but to sustained growth. The candidates spent much of the night discussing the elements that make it 20 percent more expensive to manufacture in the United States—taxes, regulation, energy and trade.

Time and again, the conversation returned to job creation—fundamentally the most significant issue in this election. Manufacturers couldn’t agree more, but we’d like to remind the candidates that it’s also essential that we fill the 600,000 job openings in the manufacturing sector that remain unfilled today because employers can’t find workers with skills that match the jobs.

Energy policy is an immediate pathway to jobs. President Obama spoke about increased oil production and a desire for an “all-of-the-above” energy strategy, but yet again, this debate came and went without the President mentioning the Keystone XL pipeline. Governor Romney had it absolutely right when he told the audience at Hofstra University that we need to “take advantage of energy resources we have and we’ll see manufacturing jobs come back.” Governor Romney advocated in favor of the Keystone XL pipeline again and also spoke of shale gas, a game-changer that would create 1 million manufacturing jobs. The President also supported shale gas efforts, but his endorsement of more federal regulation on shale will handcuff the growth opportunity that it represents.

Special attention was paid to trade tonight—a critical aspect of our economy for manufacturing growth. President Obama deserves credit for signing the Colombia, South Korea and Panama free trade agreements and increasing exports. But manufacturers need more—the United States has a trade surplus with nations with whom we have free trade agreements. Governor Romney is right in the need for expanded trade that will open up markets for manufacturers in the United States and level the playing field around the world.

As the debate repeatedly returned to jobs, tax policy and its impact on economic growth was a focal point. Tonight the candidates doubled down on their position—Governor Romney in his support for bringing down rates across-the-board and President Obama in his support for an increase in the top individual rate. Unfortunately, if the two-thirds of manufacturers who file at the individual rate are hit with the looming tax hike, they will see a continuation of the tough times they’ve experienced over the past four years. With energy and health care costs increasing and the fiscal abyss approaching, manufacturers are getting squeezed on both ends. That’s not a recipe for economic growth.

Getting the nation on track again and putting our fiscal house in order requires addressing the factors that make it 20 percent more expensive to manufacture in the United States. The moment that we put in effect the pro-growth policies that manufacturers are calling for is the moment our true recovery can begin.

Senate Finance Committee Chairman Max Baucus (D-MT) today outlined what he called his four goals for tax reform: jobs from broad-based growth; competitiveness; innovation; and, opportunity. These are goals Manufactures share.  NAM has long been calling for comprehensive tax reform that will ensure that our tax code is no longer an impediment to business and success, and one that is a far cry from the byzantine, labyrinth that is our tax code today.

Like Chairman Baucus, the NAM believes the code should be modernized, simplified and more stable. Today too many provisions regularly need to be extended. What’s more, in today’s global economy, the U.S. must have a tax code that includes a globally competitive corporate tax rate of 25% or lower and which recognizes that some products must be produced outside of the U.S. to serve the 95% of consumers that do not live within our borders. In order to ensure that American companies remain competitive we need a territorial system of taxation that encourages companies to bring foreign income back to the U.S. Additionally, we need a permanent, expanded and simplified R&D Credit to, as Chairman Baucus noted, “bolster… innovation. Innovative companies create jobs.”

One item that the Chairman didn’t address specifically but is a key goal for the NAM in tax reform is permanent lower rates for individuals – nearly 70 percent of manufacturers operate as “flow-through” busiensses with the owners paying business taxes through their individual tax returns. We would be greatly remiss to not recognize the impact of these manufacturers in the context of comprehensive tax reform.

As the Chairman said, “tax reform is a once-in-a-generation opportunity. We can cement America’s preeminence.” Manufacturers wholeheartedly agree that the right kind of tax reform can do just that and we look forward to continuing to work with the Senate Finance Committee and the House Ways and Means Committee as they continue to lay the groundwork for this effort.

Manufacturers send their thanks to Ways and Means Committee Chairman Dave Camp (R-MI) for holding a hearing yesterday on the Treatment of Closely-Held Businesses in the Context of Tax Reform. As we’ve been saying for years, more than 70% of manufacturers operate as “S” corporations or as other “flow-throughs” and pay income taxes at individual tax rates.

These entities are responsible for nearly 60 percent of total net business income and employ over half of the private sector workforce. In a nutshell: the treatment of S corps and other flow-throughs – and thus individual tax rates –should be a key part of any tax reform discussion.

However, that’s not always the case. As we noted last month, the President’s Framework for Business Tax Reform didn’t address flow-through entities because it didn’t address individual tax rates that apply to flow-throughs. Instead, the President continued to argue that individual tax rates should go back up to their pre-2001 levels for many of the very taxpayers who are business owners. What we need is comprehensive tax reform that includes permanent lower tax rates for the the small businesses that make up a significant part of the American economy and private sector employment.

We also appreciated the testimony of several witnesses who underscored the need for comprehensive tax reform that results in a simplified and streamlined pro-growth tax code to allow business owners to make decisions based not on the tax code but what’s best for their business. The NAM will continue to urge Congress to take action on this national priority.

Carolyn Holmes Lee is senior director of tax policy, National Association of Manufacturers.

The January edition of Member Focus hit mailboxes this week and is also available here. Below is this month’s column from NAM President and CEO Jay Timmons on the need for tax reform.

Time for Leadership on Tax Reform

By Jay Timmons, president and CEO, National Association of Manufacturers

Jay Timmons, NAM president and CEO

Congress and the President concluded 2011 by showcasing the dysfunction that has inspired cynicism among the American people.

The most recent fight centered on whether an extension of the so-called “payroll tax holiday” would be in effect for two months or for an entire year. The two-month extension won the day, so Congress and the President will have this debate again soon.

Businesses cannot plan a budget or operate efficiently when our elected leaders are running the country on a month-to-month basis.

Then again, no one can praise Washington’s economic logic.

Last summer, our leaders finally acknowledged our nation’s tremendous debt problem. Congress and the Administration agreed to cut $1.4 trillion over 10 years—an amount that matches our deficit for one year—and empowered a “Super Committee” to get the job done.

During deliberations, the Super Committee refused to touch one of the main drivers of our debt: entitlement programs like Social Security and Medicare, which comprise 60 percent of the budget.

The Super Committee failed to reach a deal—and nothing was done to ensure long-term sustainability of these entitlement programs. Then, attention turned to the expiring payroll tax holiday. (continue reading…)

In his remarks this morning to the National Association of Manufacturers, the NAM’s Public Affairs Steering Committee, House Majority Leader Steny Hoyer was at his most forceful when talking about the deficit. Here’s the passage:

Part of the fear and anger that we see at these town meetings is a fear that their country is in a fiscal situation which they’re going to pay for and is unsustainable. They are right. (Pounds lectern). I am one of those Democrats who believes very strongly we’ve got to get a handle on this deficit, and it will not be for free. There is no easy magic way to get there. You need to pay for what you buy. That’s what the president is saying on health care, we need to pay for what we buy. We’ll have to figure that out. But I agree with the president, I’m not going to be for a bill that adds to the deficit. We’re going to have to pay for that. So I’m going to ask you to focus on that.

The majority leader spoke in support of tax reform, said it had to be bipartisan (a la 1986), but did not hold out much hope for action soon along those lines. It was interesting that he implicitly acknowledged the merit of the arguments of companies that are protesting the Administration’s proposed elimination of deferral and other tax increases on overseas income.

But I do understand that if we and when we adopt tax reform, we need to do so in a way that helps you grow your businesses, helps you grow jobs, both here…and profit. Not only here, because we’re in an international community…

I was with the president of Oracle out in California the other day, talking about how much of their business is overseas, but much of their growth obviously is here in terms of the necessary business but their employees are here. So we’re advantaged by where ever they pay the money. We need to facilitate that, not impede it.

Notwithstanding that, offshore income continues to be a challenge for us, and we need to come up with a good solution to that issue.

Here’s the .mp3 of the relevant passages, and the transcribed remarks.