Start with an overwhelming majority of Senators in favor of extending the R&D tax credit. Add a healthy majority who support a permanent solution to the death tax. And then add another majority of those who favor increasing the minimum wage.

And the sum is… well, not 60 votes, unfortunately.

Election-year politics was apparently the variable yesterday that led to the Senate’s regrettable inability to invoke cloture on H.R. 5970, the Estate Tax and Extension of Tax Relief Act.

To be sure, manufacturers are no strangers to political calculation, and we appreciate Senators’ strongly held views on various provisions of the legislation.  Nevertheless, the failure to pass death tax reform or extend the R&D tax credit is a disappointment, and it carries serious implications for the U.S. manufacturing economy.

The National Association of Manufacturers had accordingly identified H.R. 5970, The Estate Tax and Extension of Tax Relief Act of 2006, as a "key vote" in the Senate. The expiration of the R&D credit at the end of 2005 has discouraged companies from spending on research and development, hindering innovation and investment not just in manufacturing but throughout economy; nearly 60 percent of all private industrial R&D in the United States is performed by manufacturers.  Countries like Canada and Ireland are now advertising their tax incentives in U.S. newspapers, hoping to take advantage of America’s inconstant tax policies.

Thursday’s late-evening vote also keeps the death tax alive in its full, success-punishing form. In debate, opponents of this needed reform once again claimed the superwealthy get all the benefits. Repeating that claim does not make it any less invidious or inaccurate.

Reform of the death tax is important to family-owned small- and medium-sized manufacturers because so much of their operations are tied up machinery (and a $25 million manufacturing business isn’t all that large.) Selling just one multi-million-dollar piece of equipment to pay the tax can mean gutting a company.

Instead, owners spend hundreds of thousands of dollars on estate planning, insurance and lawyers to avoid the consequences of the tax. That’s money that could be better spent on capital investment or hiring new employees. And try planning now, with the pre-2001 estate tax system and onerous tax rates sent to expire in 2010 and then resurface a year later!

While the NAM ultimately supports a full repeal of the death tax, H.R. 5970 represented a solution that provided for planning certainty, while providing a significant tax reduction to encourage business investment and growth. The failure of the Senate to move to a final vote on H.R. 5970 is a disappointment, but it need not be the final word on either the R&D tax credit or the death tax. The NAM urges Congress to do its math one more time and reach a positive conclusion: Reforming the death tax and extending the R&D tax credit really do add up – economically and politically.