Jay Timmons and Rep. Vern Buchanan | Washington Examiner
Republicans gathered this week in Milwaukee for the Republican National Convention, and among the matters they confronted was the need to stop a wave of tax increases set to fall on Americans next year, particularly on the heart of the economy — manufacturers and their workers.
It will be what some are calling a “tax Armageddon” because meaningful changes to the tax code made during the 2017 tax reforms will phase out by the end of 2025. If Congress and the White House fail to act, millions of Americans will face higher tax bills, and manufacturers will struggle to create jobs, increase wages, and invest in their local communities.
However, as Winston Churchill famously said, “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.”
It’s with those wise words in mind that we have an incredible opportunity to provide much-needed relief to main street businesses and American families across the country who are still suffering under the weight of record-high inflation and an uncertain economic future.
The 2017 tax reforms were designed to lower taxes for everyone, and for the manufacturing industry, they were a game-changer. The Tax Cuts and Jobs Act helped small businesses invest more of their earnings back into their people, and families prospered.
In 2018, manufacturers added 263,000 new jobs, the best year for job creation in manufacturing in 21 years. That same year, manufacturing wages increased by 3%. They continued growing by 2.8% in 2019 and by 3% in 2020. These were the fastest rates of annual manufacturing wage growth in decades.
But over the past few years, key elements of the 2017 tax reforms have begun to disappear. The reforms allowed businesses to immediately deduct the cost of their research and development expenses— but no longer. And incentives that made it less costly to buy machinery and equipment have become less favorable.
There’s even more at stake in 2025. Individual tax rates are scheduled to increase at the end of 2025, which will affect virtually anyone who pays income taxes — but that’s also a threat for the 96% of businesses in America organized as pass-throughs, meaning they pay taxes at the individual rate. These businesses will also lose a deduction that allows them to keep more of their earnings to invest in equipment to grow their businesses and provide higher wages for their employees.
Together, these changes will make it significantly more difficult for small manufacturers, the lifeblood of the industry, to prosper.
Besides overall higher tax bills for individuals and small businesses, 2025 will also usher in tax changes that make it more difficult for manufacturers to compete globally, as well as changes that make it harder for a family-owned business to endure after the death of its owner.
Elected leaders have the power to prevent this looming tax Armageddon. The House of Representatives has taken steps in the right direction with legislation to restore some of the critical provisions that have expired. But Congress needs to do even more over the next 18 months to preserve the common sense provisions and competitive rates that came from the 2017 tax reforms.
Congress will also have to protect our corporate tax rate, which will allow us to compete internationally and help prevent our businesses from moving overseas.
If Congress does nothing before the end of 2025, manufacturers will not be able to hire as many people. Small businesses and the middle class will be forced to send more of their hard-earned money to Washington. Communities will lose out on investments that businesses would have made into schools, charitable institutions, and economic partnerships. And families will feel the pain of higher prices and diminished opportunity because they will be affected by the difficult choices businesses will have to make.
Congress’s Manufacturing Tax Team, the National Association of Manufacturers, and manufacturers across the country are working together to make it easier for Americans to grow small businesses, create jobs, increase wages, invest more in their communities, and improve the quality of life for everyone. This is an essential step toward achieving a tax code that allows the people who make things in America to do what they do best: Compete and win at home and abroad.
Rep. Vern Buchanan (R-FL) is vice chairman of the House Ways and Means Committee and a former chairman of the Tax Subcommittee. Jay Timmons is the president and CEO of the National Association of Manufacturers.
