WASHINGTON — Business owners, CEOs and a steelworkers union official urged lawmakers on Tuesday to quickly pass a tax policy bill that has been stalled in the U.S. Senate since late January.
Witnesses invited to testify on manufacturing taxation before the Senate Finance Committee told the panel that the proposal, which includes the extension and reinstatement of three business tax incentives, was “critical” to growing their businesses.
“Manufacturers’ ability to innovate is so important to global competitiveness, and our concern is that without adequate tax incentives to do so, companies will sit still for too long,” Anna Fendley, director of regulatory and government policy for the Pittsburgh, Pennsylvania-based United Steelworkers , testified.
The Tax Cuts for American Families and Workers Act, which passed the U.S. House of Representatives in January by an overwhelmingly bipartisan vote of 357-70, was touted by both parties as a compromise to temporarily expand the child tax credit while temporarily reviving or increased tax credits available to small businesses and corporations.
Empty space in the machine shop
Courtney Silver, a North Carolina business owner, told lawmakers that the current law’s phasing out of incremental tax credits for buying new equipment is “something I think about every day” when I pass an empty lot in her machine shop , which she hoped to fill with new equipment by now.
“I know the part of machine technology that I would like to invest in. It will reduce our lead time, increase our productivity, take us into new markets we’re not currently in, and create jobs, skilled high-paying machining jobs,” said Silver, owner and president of Ketchie Inc. in Concord, where her company plays a role in the supply chain, making machine parts for manufacturers.
Mark Widmar, CEO of First Solar near Toledo, Ohio, said the company plans a $400 million investment in a research and development center in the state.
He told Finance Committee Chairman Ron Wyden that passing research and development tax incentives contained in the stalled tax bill would give his company a leg up in the race against China’s solar industry.
“If we are unable to stay ahead of innovation, we will not be able to survive the onslaught we face today. This bill is critical from that perspective because it deals with research and development and the ability to spend on research and development versus deferring research and development,” Widmar said.
“It’s also very critical to the bonus depreciation that allows for a lot of the factory expansions that we’re doing right now,” he added, referring to the expiring tax breaks for buying business equipment and property, which is also an issue for Silver.
“And delaying everything just creates more uncertainty and delay?” Wyden, Democrat of Oregon, asked in a follow-up question.
“Slow down and thousands of jobs lost,” Widmar replied.
“The time to act is now”
The bill would buy lawmakers time as they look to upcoming tax code negotiations in 2025, when numerous Trump-era provisions will be phased out, including child tax credit refunds, reduced individual income tax rates and changes to business taxes .
A provision in the proposed tax bill would actually delay a section of the Tax Cuts and Jobs Act of 2017 that critics say puts companies that write off research and development costs at a disadvantage.
The 2017 law required businesses to begin phasing out internal research and development costs over five years starting in 2022.
Wyden’s tax legislation, a bicameral bill with Missouri Republican Jason Smith, would restore companies’ ability to cover research and development costs as soon as 2026.
Wyden-Smith’s bill would also restore bonus depreciation to 100% through 2026, meaning businesses can claim additional deductions, above the allowable amount, on qualified business purchases and property.
The 100% bonus depreciation, originally established in the 2017 tax law, has decreased with each passing year and is currently 60%. It will continue to decline through 2027 if lawmakers do not restore it in the proposed tax bill.
Silver, who told lawmakers about the delay in buying equipment for her machine shop, said the bonus’s declining depreciation was an “obstacle.”
“It changes the calculation of my return on investment (on the purchase) and seems to me an irresponsible business decision and too risky. It’s a terrible feeling, to be honest,” she told lawmakers.
The GOP is unhappy with the child tax credit
Movement on the tax bill is stalled as Republican senators continue to oppose a provision that would allow families to temporarily use income from a previous year on their tax returns to calculate their child tax credit if their income is below -higher than the current tax year.
GOP lawmakers argue that allowing families to choose a higher annual income removes the incentive to work for middle- and low-income households seeking credit. Proponents of the child tax credit refute this argument.
Wyden urged his colleagues that “the time to act is now.”
“I remain open to all parties willing to work in good faith to achieve this,” he said in his opening remarks at Tuesday’s hearing. “Some of my colleagues understand the urgency here. And let’s understand that this set of policies will not be on the table in 2025 if this bill is delayed.”
Rep. Mike Crapo said he didn’t know “that there is a stronger advocate in Congress for extending and making permanent” tax incentives for businesses.
“I hope we can get there sooner rather than later,” said Crapo, an Idaho Republican. “There are, as everyone knows, some concerns on the part of the Republican Senate about other provisions in the bill, and I hope that the Republican Senate can have its vote, we can deal with it and find a solution quickly.”
“Times are tough, and like almost every issue in this Congress today, there are tough battles to be fought. That being said, I do not agree with the testimony of either of you,” he told witnesses.
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