This story can also be found within the NAM’s R&D action center.
In an industry where technology and processes can change quickly, manufacturers in the United States must be able to invest, grow and maintain their edge against foreign competitors. At a time when China is providing extensive support for its manufacturing industry, the NAM is pushing to ensure that the men and women who make things in America have the tools they need to succeed.
The challenge: Right now, China’s tax policies offer significant incentives for research and development. For example, China offers a super deduction for manufacturers performing R&D by allowing them to deduct 200% of their R&D expenses. This policy makes it more attractive for manufacturers in China to invest in innovation—and to out-compete manufacturers in the United States.
The comparison: Meanwhile, U.S. manufacturers, who drive more innovation than any other sector, face a harmful tax change that if not reversed will hurt jobs, innovation and competitiveness.
- Up until January 2022, a business in the United States could deduct 100% of their R&D expenses in the year during which those expenses occurred.
- But a change in the tax code that took effect this year now requires businesses to spread those deductions over a period of years—the so-called amortization requirement—making investment in innovation more expensive to conduct.
Recent action: This week, the NAM rallied the business community to urge Congress to repeal the recent tax change, so that businesses can continue to innovate, bolster the economy and create well-paying jobs.
- “Failing to reverse this change will cost well-paying jobs and reduce future innovation-directed R&D,” according to the NAM’s letter, which was signed by more than 400 companies and business organizations.
- “Requiring the amortization of research expenses will reduce R&D spending and lead to a loss of more than 20,000 R&D jobs in the first five years with the number of lost jobs rising to nearly 60,000 over the following five years. Moreover, when accounting for the spillover effect from R&D spending, nearly three times as many jobs will be affected.”
- “At a time of increasingly fierce global competition for research dollars, this change will make it harder for the next R&D dollar to be spent in the U.S. which will ultimately hurt future U.S. competitiveness.”
What we’re saying: “Research and development is the lifeblood of manufacturing,” said NAM Senior Director of Tax Policy David Eiselsberg. “It is what drives innovation, competitiveness, economic growth and the creation of high-paying jobs. But that is all at risk unless Congress quickly acts to repeal the harmful change in the tax treatment of R&D expenses.”
Finer point: “If Congress and the administration do nothing, small manufacturers will face a huge tax increase at the end of the year,” NAM Executive Vice President Erin Streeter warned. “This will have a crippling effect—and we’re mobilizing support at the NAM across the industry to get another hard-fought priority done.”
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.
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