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HEN CONGRESS DEPARTED
Washington in the waning
days of September, it unfor-
tunately left behind just one
thing businesses could be
certain about: uncertainty.
Federal spending and soaring debt, the
new health care law, the flood of govern-
ment regulations and even the rise of pop-
ulist rhetoric – these have already con-
tributed to an endemic uncertainty that
has slowed recovery and job creation. But
by failing to act on tax rates set to expire
at the end of this year, the House and
Senate only made it more difficult for
manufacturers to plan, invest and com-
pete in the global marketplace.
Most critically, Congress refused to
extend the 2001 and 2003 tax cuts affecting
individual income tax rates, dividends and
capital gains. The fate of a key incentive for
investing in innovation (the research and
development [R&D] tax credit) remains
unclear. Meanwhile, the estate tax, which
fell to 0 percent this year, is set to jump
back to a top rate of 55 percent in 2011.
DISTURBING SCENARIO
Consider what this means for owners of
small but successful third-generation com-
panies that made breakthroughs in manu-
facturing processes and plan to commer-
cialize the invention, hire people and
purchase equipment to apply the processes
to an entire new product line. To raise cap-
ital, they intend to sell some investments.
“I need to plan for the R&D, all of the
new people and equipment, so I guess
there’s depreciation involved,” a business
owner explains to the company’s account-
ant. “Capital gains, of course, from the
stock sales. And, I really think this ven-
ture is going to take off, so I want to make
sure we’re prepared to leave the company
to the children. So what kind of tax lia-
bility should I anticipate?”
“Who knows,” the accountant responds.
This is hardly an environment con-
ducive to investment, to say the least. The
new level of uncertainty only adds to the
competitive disadvantage posed by the
United States’ second highest corporate
tax rate among developed nations.
W
By John Engler
COMMENT • NAM
Congress Addresses Uncertainty:
Avoidance As Action
FOR
MANUFACTURERS
TO INVEST
AND HIRE, IT’S
TIME TO END
UNCERTAINTY
ABOUT TAXES.
HOW DID
CONGRESS
ADDRESS THIS
CRITICAL ISSUE?
THEY LEFT
TOWN.
10 INDUSTRY TODAY