As a family-owned small business that works with giant, complex industries like aerospace and medical devices, Westminster Tool knows its ability to innovate is what sets it apart. The 25-year-old company makes complex injection mold systems, composite tooling and components—including devices used in medical transplants and high-performance plastic parts for military aircraft.
- “We’re constantly looking to improve ourselves,” said Westminster Tool Chief Financial Officer Colby Coombs. “We’re always looking to push technological advancements, bring products to market faster, improve quality and reduce cost.”
So when a harmful R&D tax change went into effect, it caused real problems for the Connecticut-based company.
The change: Until recently, businesses could deduct 100% of their R&D expenses in the same year they incurred the expenses. But since last year, the tax code has required businesses to spread their R&D deductions out over a period of five years, making it much more expensive upfront to invest in the kind of innovation at which Westminster Tool excels.
The impact: As a result of the policy shift, Westminster Tool has found itself paying significantly more in taxes—and having to scale back its ambitions.
- “The impact has been large,” said Coombs. “Because of this change, I had to reconsider a contract that was going to mean new jobs and diversification just based on the cash flow that I needed in order to pay the government.”
- “Ultimately, this law may prohibit me from hiring more people, training more people in new skills, investing in our community and bringing in new work stateside.”
The uncertainty: As a result of uncertainty, small businesses are being forced to hold off on investments they can no longer afford.
- “I am at the mercy of this law, waiting to see how it plays out before I can make any large-scale investment in our business,” said Coombs. “It is putting massive pressure on our ability to grow and be an employer of choice in our community.”
The urgency: Coombs also emphasized the international nature of the challenge. With so many global competitors—especially those based in China, which provides a super deduction for manufacturers—an inability to invest in R&D will hurt manufacturing in the U.S.
- “If Congress doesn’t do the right thing this year, this is going to be a job growth prohibitor or a job killer,” said Coombs. “We are trying to compete with international competitors that aren’t hamstrung by this problem. If Congress fails to fix this issue, it will drastically impact my ability to compete with the global powers in our industry.”
The small business effect: Coombs notes that small businesses in particular will be harmed by this change, since they don’t have the cash reserves to take on significant new expenses.
- “Small companies don’t have the balance sheets to handle this,” said Coombs. “We are doing the best we can to survive, to represent our state, to make advancements and offer the best job opportunities we can. This law is prohibiting me from doing what we’re striving to do.”
The last word: “Failure by Washington to reverse this change will put companies underwater and out of business,” said Coombs.
You can find more information and ways to take action at the NAM’s R&D Action Center.
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