September 14, 2017
Fundamental tax reform is a critical way that Congress can create an economic environment that helps both small and large manufacturers thrive. Given that 30 years have passed since the last fundamental restructuring of our tax system, Plumbing Manufacturers International (PMI) strongly advocates for comprehensive tax reform that lowers tax rates, irrespective of business size or structure, and restores simplicity and predictability to the tax code.
Our current U.S. tax code is a significant negative drag on economic growth and competitiveness. While other nations have been lowering their tax rates to encourage economic growth, the United States’ combined (federal plus state) tax rate is now the highest in the industrialized world and 8% higher than our nine largest trading partners. Due to the diversity of business models in plumbing manufacturing, including S corporations, partnerships, C corporations, etc., we urge lawmakers to lower tax rates for corporate and pass-through entities simultaneously. Indeed, pass-through companies are the most common business form in the United States and include many companies in the manufacturing supply chain.
In addition, the current system penalizes companies that operate globally by imposing additional taxes on income generated outside the United States when those funds are returned home. Our tax code also does not provide for adequate cost recovery for major capital investments. A robust capital cost-recovery system—similar to the bonus depreciation system in effect today — reduces the after-tax cost of investment and promotes economic growth by stimulating investment, which has a multiplier effect throughout the economy.
Message to Congress
As Congress considers a more significant overhaul of the federal tax code in 2017, PMI urges lawmakers to undertake comprehensive tax reform that includes the following key principles:
- Lower Tax Rates - Reduce tax rates for companies of all sizes no matter how they are organized. High tax rates reduce the after-tax income that plumbing manufacturers need to reinvest and grow their businesses.
- Permanent Estate Tax Repeal – Some plumbing manufacturers remain family-owned; permanent repeal will keep these family-owned businesses operating for future generations.
- Full Expensing for Capital Equipment - Retain a robust capital cost-recovery system, such as accelerated depreciation and full expensing, to drive new investments and create new jobs.
- Strong & Permanent Research and Development (R&D) – Maintain a permanent R&D incentive to keep performing R&D and boost U.S. innovation.
- Shift to Territorial System – We should replace our system of worldwide taxation with a territorial system so that businesses aren’t double-taxed on income earned overseas. This would help American companies compete globally while promoting economic growth at home.
For more information, contact PMI’s Federal Affairs Consultant, Stephanie Salmon, 202-452-7135, email@example.com