It is unfortunate that in a time when Arizona manufacturers need a consistent and positive message from Washington about economic policy, all we seem to hear is partisan bickering and a confusing and uncertain tax policy future. What our friends in D.C. don’t seem to understand is that the mixed messages are placing a drag on the manufacturing sector’s ability to recover from the recession.
On the one hand, politicians in Washington are finally pushing to make the research and development tax credit permanent, something the Arizona Manufacturers Council has long advocated. Unfortunately, these same leaders in Congress and in the White House appear to be caught in the old rhetoric of partisan politics when it comes to extending the Bush tax credits. The big debate is whether to impose a tax increase on individuals making more than $250,000 a year. The traditional debate positions the interests of the “wealthy” against the interests of middle class. What is lost in this debate are the interests of the small manufacturer and, more importantly, the employees of these vital economic engines.
Many middle-class Americans have little sympathy for people earning more than $250,000 a year as they believe tax cuts for these “fat cats” are not fair to the average taxpayer. However, if these taxpayers knew that many of the supposed “fat cats” were really small-business owners who reinvest their profits in their business and employees, attitudes would most certainly change.
According to the National Association of Manufacturers, more than 70 percent of small manufacturers pay income taxes as individual filers. Many have incomes well above $250,000 a year, but the demands of capital and reserves in a tight credit market are high for these firms. By levying a new tax on these businesses, the investment that should have gone back into the business will be siphoned to Washington. This foolish policy costs jobs and slows the economic recovery for the same middle-class individuals who everyone in Washington claims they are trying to protect.
If the position of many small manufacturers is weakened by the elimination of the Bush tax cuts on small businesses earning more than $250,000, the competitiveness of medium and large manufacturers is also at risk.
The competitive position of U.S.-based firms lies, in part, on a strong and vibrant supply chain. Reducing the competitiveness of these suppliers through tax increases is nothing more than an incentive program for overseas manufacturers. In Arizona, we have found that the health of our manufacturing industry is not based just on the success of a few of its largest players, but it is the strength of the entire supply chain.
My hope is that the divisive rhetoric will be replaced with the realization that unless the economy starts to grow again, neither the “rich” nor the middle class will benefit.
— Mark Dobbins is past chairman of the Arizona Manufacturers Council and chairman-elect of the Arizona Chamber of Commerce and Industry.