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Mid-Term Election: Tax Reform, Workforce/Skills Top Council Issues

Posted By David Brousell, October 14, 2014 at 3:39 PM, in Category: Manufacturing Advocacy

Members of the Manufacturing Leadership Council met yesterday to discuss what’s most at stake for the manufacturing industry in this year’s mid-term Congressional elections, an important event in which 33 Senate and all 435 House seats are up for grabs.

Tax reform and the complicated issue of the workforce and required skills, including attracting so-called millennials to manufacturing careers, dominated a nationwide, 1-hour conference call that also touched on such issues as immigration, infrastructure, the minimum wage, and trade.

One Council member, from a small mid-west metal fabrication company,  said that tax code changes needed to be made to protect so-called subchapter S corporations -- which are manufacturers and other businesses that are eligible to pass corporate income, losses, deductions, and credit to their shareholders, resulting in taxation at the shareholder level rather than the corporate level – from double taxation.

“This issue is dead on the table until after the election,” the member said.

Part of the problem manufacturers face with the subchapter S issue, he said, is that many politicians in Washington are ignorant of what an S company is. He cited the experience of a recent lobbying trip to Washington in which “two out of three” people the group met with didn’t understand the particulars of the subchapter S law.

The Council member also raised the issue of state and federal regulations, which place a form of taxation on companies. “People writing regulations have no experience in manufacturing and don’t understand the effects,” he said, citing one company that faced the difficult choice of either complying with “almost clinical-grade air scrubbing” requirements, which would have cost $4 million, or buying a new metal stamping press that could have helped expand its business.    

Several Council members said the need for new supplies of skilled labor is a major issue in this election in part because of its convergence with immigration reform and off-shoring.

One Council member said it has been difficult to find talent with machining and welding skills. In addition, there have been immigration issues in getting candidates properly documented. “It’s easy to get unskilled labor,” the member said. “Skilled labor is where we really struggle.”

But the biggest issue, the member felt, was the overall cost of doing business in the U.S. compared with other countries, particularly Mexico. “Mexico seems to be the solution for high labor costs,” he said.

Council members also discussed the Obama Administration’s National Network for Manufacturing Innovation initiative and the currently-pending legislation that would fund it, known as the Revitalize American Manufacturing and Innovation Act (RAMI). So far, five, U.S. Innovation Institutes have been announced – Additive Manufacturing, Digital Manufacturing and Design, Lightweight and Modern Metals, Next Generation Power Electronics, and Integrated Photonics.

The RAMI Act has passed the House of Representatives and is now awaiting action in the Senate, whose composition could change after the election. “This is a good thing,” said one Council member of the RAMI legislation. “But we needed this 10 years ago when companies were off-shoring. Let’s just hope we’re not a day late and a dollar short.”

Time always tells, of course, but, in the meantime, Council members said that the most important thing for manufacturers to do to ensure that what’s at stake for the industry in the mid-term elections is noticed and acted upon is to vote on November 4.

But that’s only one step. Perhaps the more important step, and certainly a greater challenge, is to keep industry issues and concerns on the front burner in Washington and in state houses across the nation by continuous communication and education.

What happens in between elections can be almost more important than what happens on election day itself.

Written by David Brousell

Global Vice President, General Manager and Editorial Director of the Manufacturing Leadership Council

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