Labor & Employment

Policy and Legal

“If Taxes Go Up, I Have Fewer Choices,” Says Manufacturing CEO

Klaussner Home Furnishings has made three increases in its workers’ wages over the past 10 months, while also adding benefits. Yet, the company’s ability to invest in workers and add much-needed equipment may be in danger if Congress proceeds with proposed tax hikes, according to President and CEO Terry McNew. These increases could do real harm to manufacturers at a time when the economy is starting to recover from the pandemic.

Benefits for workers: McNew, who has led Klaussner for about a year and a half, explains that he’s working hard to take the company from the 19th century to the 21st century—“skipping over the 20th,” he says—by eliminating the use of piecework and ensuring that all current workers have full 40-hour workweeks.

  • That transition included the wage increases mentioned above, as well as an expansion of benefits, such as a reduction in health insurance deductibles and the addition of mental and behavioral health benefits.
  • “If taxes go up, I have fewer choices,” says McNew. “I’ll have even more limited resources” for raises and other benefits.

Facility expansion: McNew also credits tax reform with helping Klaussner improve its facilities and buy much-needed equipment.

  • Late last year, the company installed new roofs, and it is currently in the market for new sewing machines. Its new CIO is looking to invest in enterprise resource planning and materials requirements planning software, which will cost about $5 million.
  • McNew says these plans were made possible by a tax provision called full expensing, which allows companies to deduct the full cost of capital expenditures in a single year.

The economic context: McNew points out that manufacturers are dealing with a number of difficulties right now, including higher materials and shipping costs, which are amplifying their worries about potential tax changes.

  • In light of all these factors, McNew says, “I told my executive staff we are not getting raises this year, but instead giving raises to employees.”

The last word: NAM President and CEO Jay Timmons said, “As we emerge from the economic catastrophe caused by COVID-19, American businesses are at a pivotal point in our nation’s history. Manufacturers like Klaussner are helping to lead the economic recovery in the wake of the pandemic. But increasing the tax burden on companies in America would mean fewer American jobs, lower wages and a smaller economy.”

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