How a Tax Change Will Strangle a Small Manufacturer’s R&D
Marlin Steel Wire Products spent its first 30 years making bagel baskets. When Drew Greenblatt bought the custom wire and metal fabrication company in 1998, he thought it would be making bagel baskets for the next 30 years as well—but soon, international competition changed the math.
“Suddenly, China started manufacturing bagel baskets and shipping them to New York City for cheaper than I could get the steel,” said Greenblatt, Marlin’s president and owner. “But then, we got a phone call from an engineer at Boeing who needed an innovative, customizable basket. And that was the eureka moment.”
The shift: Greenblatt recognized that innovation would help him outcompete foreign companies that could manufacture products more cheaply.
- “We realized we couldn’t thrive in a commodities market,” said Greenblatt. “We had to come up with novel ways to make a basket so that it would make no financial sense to buy from China or Mexico.”
- “We wanted to be able to say to buyers, you must buy from the American innovative company, because we’re coming up with such slick ideas that our product blows the competition away.”
The growth: Today, Marlin Steel is nearly 30 times larger than it was when Greenblatt bought it and heavily invested in research and development.
- “Today, Marlin is 15% degreed mechanical engineers,” said Greenblatt. “We have chemical engineers. We’re coming up with the most innovative racks and systems out there.”
- “People are showing us their operations and asking us to reverse-engineer solutions that will work for them. And we’re doing it.”
However . . . A recent tax change threatens to throttle the company’s progress. Until about a year ago, businesses could deduct 100% of their R&D costs in the same year they incurred those expenses.
- But since last year, a tax policy change now requires businesses to spread their R&D deductions out over a period of five years, making it much more expensive to invest in innovation.
The impact: “Our taxes will be $600,000 higher than they should have been this year—we’ll pay four and a half times more on taxes,” said Greenblatt.
- “What that means is that it makes sense for us not to hire six more engineers. Not to buy three more press brakes [machines for bending metal parts] or hire people to work them. It’s incredibly shortsighted, a horrible policy screwup, and the ripple effects are massive.”
The scope: Greenblatt also emphasizes that the tax change will harm many small businesses.
- “People tend to focus on the bigger companies and how it will hurt them—and it will hurt them—but it will also hurt the little guy,” said Greenblatt. “And the little guy is the job creator in America.”
The last word: “American innovation—that’s our secret sauce,” said Greenblatt. “That’s how we’re going to grow jobs and pay people well and give good benefits and steady employment without layoffs. That’s how we’re going to beat a recession. We need to have the coolest, most innovative products in the world. For us, innovation is key.”
Manufacturers Unveil Competitiveness Agenda Ahead of Midterm Elections
“Competing to Win” offers a path for bringing the country together around policies, shared values and a unified purpose
Washington, D.C. – Ahead of the midterm elections, the National Association of Manufacturers released its policy roadmap, “Competing to Win,” a comprehensive blueprint featuring immediate solutions for bolstering manufacturers’ competitiveness. It is also a roadmap for policymakers on the laws and regulations needed to strengthen the manufacturing industry in the months and years ahead.
With the country facing rising prices, snarled supply chains and geopolitical turmoil, manufacturers are outlining an actionable competitiveness agenda that Americans across the political spectrum can support. “Competing to Win” includes the policies manufacturers in America will need in place to continue driving the country forward.
“‘Competing to Win’ offers a path for bringing our country together around policies, shared values and a unified purpose,” said NAM President and CEO Jay Timmons. “The NAM is putting forward a plan filled with ideas that policymakers could pursue immediately, including solutions to urgent problems, such as energy security, immigration reform, supply chain disruptions, the ongoing workforce shortage and more. Manufacturers have shown incredible resilience through difficult times, employing more workers now than before the pandemic, but continued resilience is not guaranteed without the policies that are critical to the state of manufacturing in America.”
The NAM and its members will leverage “Competing to Win” to shape policy debates ahead of the midterm elections, in the remainder of the 117th Congress and at the start of the 118th Congress—including in direct engagement with lawmakers, for grassroots activity, across traditional and digital media and through events in key states and districts as we did following the initial rollout of the roadmap in 2016.
The document focuses on 12 areas of action, and all policies are rooted in the values that have made America exceptional and keep manufacturing strong: free enterprise, competitiveness, individual liberty and equal opportunity.
Learn more about how manufacturers are leading and about the industry’s competitiveness agenda at nam.org/competing-to-win.
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The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.8 million men and women, contributes $2.77 trillion to the U.S. economy annually and accounts for 58% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org