Your turn: Congress must act to maintain America's manufacturing strength
America is experiencing a manufacturing renaissance, but recent tax law changes threaten our nation’s ability to compete with China and other countries when it comes to vital research and development programs – which are the lifeblood of manufacturing innovation.
Amazing research and development innovations are responsible for the creation of new life—saving medicines, nutritional food and revolutionary energy sources, and other technologies that improve our lives every single day.
After seven decades, Congress recently eliminated the ability of manufacturers to fully deduct our research and development expenses in the year in which they occurred. As a result, the United States is now only one of two industrialized nations that do not offer immediate expensing, resulting in significantly higher costs, especially for small manufacturers. American manufacturers are now at a competitive disadvantage throughout the world.
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At the same time, China has doubled-down, allowing for super-deductions, meaning that Chinese manufacturers can get a 200 percent credit for their research and development expenditures. For every $100 spent on innovative research and development in America, a manufacturer will receive a $10 credit over five years while a Chinese company will get $200. It simply makes no sense to impose this limitation on American manufacturers.
A recent economic analysis from Ernst & Young showed that this change will result in the loss of 60,000 manufacturing jobs annually for five years. This will undoubtedly be felt in Illinois, which is a manufacturing powerhouse with 600,000 workers who contribute the single largest share of our economy so it could impact our state.
With interest rates rising, Congress also needs to act by allowing full interest deductibility so that manufacturers can finance critical investments in machinery and equipment. It is currently limited to 30 percent, making it more difficult for manufacturers to buy equipment, grow businesses, and hire employees.
Finally, our elected leaders need to make bonus depreciation permanent. Former Presidents George W. Bush and Barack Obama both used full bonus depreciation following the attacks on September 11 and during the Great Recession to stimulate manufacturing job growth and encourage capital investment.
Manufacturing is built on innovation and has been a bright spot in the economy. However, we are facing intense international competition and risk our technological advantage if America does not act to secure every dollar of investment.
The good news is that bipartisan bills have been introduced in Congress and the U.S. Senate and it is time for them to act and eliminate these unnecessary barriers to greater manufacturing growth.
Mark Denzler is the president and CEO of the Illinois Manufacturers’ Association.
This article originally appeared on Rockford Register Star: Your turn: Congress needs to act to keep manufacturing strong in US
