By Paul Merrion
In a tax-reform pow-wow with Chicago-area manufacturers yesterday, Rep. Peter Roskam heard one clear message: Congress must reduce the cost and complexity of dealing with federal tax law.
The Wheaton Republican, a member of the tax-writing Ways and Means Committee, is co-leader of a working group on tax-reform issues for manufacturing, one of several industry-specific task forces the panel has formed. He met in West Chicago with CEOs and other executives from firms such as Boeing Co. and Navistar Inc. as well as small firms such as SWD Inc., a metal parts refinisher in Addison.
"I will be reporting back that my manufacturing constituents place a premium on simplicity," the congressman said after the meeting. "That's a theme we should pursue."
It also happens to be a major theme that Ways and Means Chairman Dave Camp, R-Michigan, already is pursuing in a comprehensive tax-reform bill he outlined for discussion purposes last month. It would reduce the top corporate tax rate to 25%, down from 35%, and offset the revenue loss by ending corporate tax credits and deductions, which haven't been specified in detail.
Closing those so-called loopholes is where the fight over tax reform is expected to take place, probably starting later this year. Long-standing corporate tax breaks such as research and development tax credits and even accelerated depreciation could be on the chopping block for the sake of simplicity and lower tax rates.
Several smaller manufacturers told Rep. Roskam--who is chief deputy whip, the fourth-ranking House GOP leader--that they don't apply for R&D tax credits, even though they qualify, because the paperwork is too complex to make it worthwhile.
"They said we're doing R&D and yet from a compliance point of view it's a hassle to pursue," said Mr. Roskam. "It's great on paper, but is it driving behavior?"
Small manufacturers such as SWD also expressed concern that firms organized as Subchapter S corporations, which flow profits through to owners and are taxed at the personal level, could be hurt if tax reform focuses on firms taxed at the corporate level.
"The bottom line is that many small and med-sized manufacturers could be devastated," Rick Delawder, president of SWD, said after the meeting.
Although Boeing is a big user of R&D tax credits, the aerospace giant has long favored eliminating those credits and other tax incentives in order to get rates down.
"Given the present way it is being administered, it results in an undue burden, a high level of complexity and great deal of uncertainty," James Zrust, Boeing's vice president for taxes, said after the meeting. "Accelerated depreciation is one of those expenditures that might be put on the table. From a Boeing standpoint, it's an expenditure Congress has to look at and put on the table. It's fair game."