This story can also be found within the NAM’s R&D action center.
After a tax law change went into effect in 2022, manufacturers across the country found themselves facing new obstacles to investment in research and development. For Vermeer Corporation—a manufacturer of industrial and agricultural equipment based in Pella, Iowa—the change is causing real concern.
The background: Until the beginning of this year, businesses could deduct 100% of their R&D expenses in the same year they incurred the expenses. Starting in 2022, however, a change in the tax law required businesses to spread deductions over a five-year timeframe. That change is making investment more expensive and preventing some companies from putting their resources into critical innovation.
Constant innovation: As a company that makes a variety of diverse products for fields like agriculture, mining, utility construction, forestry and renewable energy, Vermeer is always working at the cutting-edge of new technology, and that requires significant investment in R&D.
- “Vermeer designs and builds specialized equipment—and it has to be innovative,” said Vermeer Corp. Senior Director of International Business Development and Government Affairs Daryl Bouwkamp. “We have to push that leading edge constantly. The history of Vermeer is a history of invention and innovation.”
Vital competition: According to Vermeer, R&D is also vital to the ability of manufacturers in the United States to compete with foreign companies.
- “We’re not the only company that’s innovating around the world,” said Vermeer Vice President of Finance Ryan Agre. “There’s pressure from companies in countries that are producing products like ours.”
Immediate impact: The new tax law has already had a serious effect, according to Agre.
- “It’s a material, meaningful impact,” said Agre. “It’s millions in additional tax that we will incur at Vermeer just next year—and that’s the one-year impact, so it’ll be even more significant over a five-year implementation period. We’re actively having to harvest cash elsewhere to offset this impending change.”
Pushing back on China: The U.S. tax law change also stands in stark contrast with policies from countries like China, according to Vermeer.
- “When you look at the generosity of foreign support, especially China’s, versus the United States, it’s so lopsided,” said Bouwkamp. “China is trying to drive behavior toward R&D—and that’s something we’re lacking.”
The big picture: Agre also noted that making R&D more expensive can make companies like Vermeer risk-averse—more likely to direct the investments they do make toward smaller or more incremental innovations, and less willing or able to invest in the kind of ambitious research that can offer truly transformative results.
- “We don’t know what we haven’t discovered yet,” said Agre. “We have a history of being innovative in new spaces, and that requires individuals to have funding and freedom of thought to go out and experiment. When you’re trying to create something that doesn’t exist today, you’re going to hit some home runs—but you’re also going to strike out a bit. When you need more certainty, you start cutting out uncertainty and making fewer investments in big ideas. That impacts not just Vermeer but the whole economy.”
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