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Arizona manufacturers worry about higher taxes from Washington

This is a critical moment for Arizona’s economy. Manufacturing teams like mine are reckoning with the impact of record cost increases, historic workforce shortages and supply chain disruptions.

That’s why my company, Valley Forge & Bolt has been paying close attention to policy debates in Washington, most specifically recent proposals that would raise taxes on Arizona manufacturers as part of a budget “reconciliation” plan.

The fact is that the plan initially proposed in Congress would disproportionately affect manufacturers, according to the nonpartisan Joint Committee on Taxation. According to the National Association of Manufacturers, the specific book tax provision before Congress would cost us over 218,000 jobs in 2023 alone and would reduce real gross domestic product by $68.5 billion.

Michele Clarke

This isn’t just a theoretical issue affecting “big business.” The competitiveness of our manufacturing sector is on the line. Take the example of my company, Valley Forge & Bolt, a small manufacturer here in the Phoenix area. While I am a small, local business, my products are used all over the world. My bolts go into industrial applications, underwater rigs, offshore cranes and hopefully into new clean wind energy applications. My customers may be subject to the book tax; if they have less money to invest in innovative products there’s a risk my company will make less – and the entire manufacturing sector will lose.

Thanks to the reforms to our tax code enacted in 2017, our company has been able to expand our capacity, increase production and profits, and provide a more comfortable working environment. Utilizing provisions in the tax code to expense equipment investments, we were able to purchase a $300,000 robot and $500,000 in a new forging press, that increased our capacity. This type of equipment is typically the most expensive type of capital outlay for any manufacturer, and tax reform made it easier to invest in these types of advancements that help us compete within our industry with other countries.

Moreover, these technological investments have put Valley Forge on pace to enjoy our best sales in almost 50 years. We have been able to boost employment by 20% in 2018, invest in expansive health care coverage for our workforce, and maintain this commitment to employee health, as well as our 401K match program. Our workers benefit directly from the increase in sales, as well through our longstanding incentives program, handing out quarterly bonuses once key goals are met.

This was a story we were proud to share with Sen. Kyrsten Sinema just several weeks ago when we welcomed her to Valley Forge for a roundtable discussion with area manufacturers about the policies we need to stay competitive. In particular, we thanked the senator for her continuing bipartisan leadership on many issues, such as her efforts to pass the Infrastructure Investment and Jobs Act. That historic, bipartisan legislation secured critical funding to fix our nation’s infrastructure and nearly $1 billion in public transit funding for Arizona over the same timeline, helping make our state more economically competitive—all without raising tax rates on manufacturers.

Congress has taken important steps since that meeting as well to invest in our semiconductor production and other provisions to advance manufacturing competitiveness as part of the “CHIPS-Plus” Act.

While there are reports of welcome changes to the tax bill in Washington, manufacturers remain skeptical and need to see the details. We now need our entire Arizona congressional delegation to stand against harmful taxes on manufacturers.

Michele Clarke is the Chief Executive Officer of Valley Forge & Bolt.

 

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