Combating Economic Headwinds with Stable, Pro-Investment Tax Policy (The Hill)

While it’s true the economy is growing, that growth has been anything but steady—and in some cases, downright unpredictable—for U.S. companies and families. In the second quarter of 2015, the economy grew 3.9 percent, but then in the third quarter, it grew only 1.5 percent. Meanwhile, the manufacturing sector and the broader economy face multiple headwinds, including lagging international demand and tepid domestic consumer demand.

“New durable goods orders declined for the second straight month despite decent growth in motor vehicles and parts sales,” said National Association of Manufacturers (NAM) Chief Economist Chad Moutray. “Nondefense capital goods spending excluding aircraft, which is often referred to as ‘core capital goods,’ fell 1.6 percent and 0.3 percent during the past two months. This suggests lower investment spending overall for the sector.”

While some of these factors are part of the business cycle, Congress has created some headwinds of its own. In NAM surveys, government regulations and taxes perennially top the list of primary business challenges for manufacturers. While this category is a target-rich environment, one of the most frustrating tax issues for manufacturers is the temporary nature of important investment tax incentives that right now are stuck in the “off” position again.

These investment provisions—bonus or 50 percent depreciation and Section 179 enhanced expensing—are part of the so-called “extenders,” a package of more than 50 temporary tax provisions that expired at the end of 2014 and are held up in Congress. House tax writers appreciate the critical value of the investment incentives and approved permanent extensions of these incentives earlier this year.

As a capital-intensive industry, manufacturing uses these pro-investment provisions more than any other sector of the economy. The NAM still believes in the critical need for a total revamp of the U.S. tax code, but in the meantime, these important incentives help reduce the headwinds created by our antiquated tax code, which includes the highest corporate tax rate among developed countries.

Moreover, companies need these provisions revived as soon as possible, for as long as possible. Otherwise, thousands of manufacturers will be left with the choice of either sidelining the types of operations and investments that help grow their companies and create jobs or paying higher taxes in this already uncompetitive tax environment.

Anyone who is paying attention would agree that our economy is not where it should be. Congress can and should do all it can to calm the headwinds and provide certainty on the status of these critical pro-growth tax policies and keep these provisions in place as a bridge to comprehensive tax reform.

Lee is senior director of Tax Policy at the National Association of Manufacturers.

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