By Kip Eideberg, AEM Vice President, Public Affairs & Advocacy
As Republicans are stepping on the accelerator to move tax reform swiftly through Congress this year, the equipment manufacturing industry continues to make the case that a modern tax code for the modern manufacturing economy will unleash the power of our industry and improve the lives of all Americans.
Our industry includes a diverse set of businesses. Some of AEM’s member companies are publicly traded, multinational corporations with facilities and operations across the globe. Still many more equipment manufacturers are privately held corporations or family-owned businesses whose income is treated as personal income under the tax code.
That is why we have spent the year talking to CEOs, CFOs and COOs of our member companies about what changes to the U.S. tax code would most benefit equipment manufacturers. And as AEM’s president Dennis Slater writes in the Wisconsin State Journal, our priorities are straightforward: we need a lower rate and a simplified tax code.
AEM member companies of all structures and sizes overwhelmingly agree that the top priorities for tax reform are a significantly reduced topline rate, a simplified and modern code and permanent reform.
The good news is that the tax reform framework released last month by the Administration and Congress goes a long way toward achieving these goals. The framework calls for reducing the top rate for corporations to 20 percent and reducing the tax rate applied to business income of small and family-owned businesses conducted as sole proprietorships, partnerships and S corporations to 25 percent. These are meaningful rate reductions that we as an industry support.
At the same time, the framework does away with estate taxes that penalize family-owned manufacturers who want to hand over their businesses to a new generation of leaders. The framework also allows businesses to immediately write off the cost of new investments in depreciable assets for at least five years, which would both spur investment in new equipment and promote equipment manufacturers’ ability to invest in their own business. This is critically important to the long-term economic growth of our industry, and we hope that the two tax-writing committees will continue to work to further enhance expensing for business investments.
The framework also puts equipment manufacturers on a level international playing field by replacing the existing, outdated worldwide system with a “territorial system,” where the overseas profits of U.S. companies are no longer subject to U.S. tax. While important details still need to be worked out, this will encourage equipment manufacturers to bring back jobs and profits trapped overseas.
The President is fond of saying that we face a “once-in-a-generation opportunity” to overhaul our nation’s tax code. And he may very well be right. But even a few smart choices on tax reform will have positive and enduring effects for the equipment manufacturing industry. It is time for our elected leaders to shore up manufacturing in America, and they should start by passing comprehensive tax reform as soon as possible.
If you would like a copy of the report Tax Reform and the Equipment Manufacturing Industry, please contact Kip Eideberg.