Manufacturers say lower corporate tax rate would boost their competitiveness

Manufacturers view a corporate tax rate of 25 percent or less, a long-term research and development tax credit, and robust cost-recovery provisions as essential elements of tax reform that would make them more competitive, according to survey results released Thursday.

"As the tax debate moves forward, there is growing interest in comprehensive business tax reform that includes lower tax rates for corporations and for business income earned by 'pass-through' entities. The individual tax code would remain essentially the same," the National Association of Manufacturers (NAM) said in its report on the survey. "With this in mind, we asked a series of questions to gauge interest in comprehensive business tax reform."

NAM asked its members questions about tax reform in its outlook survey for the second quarter of 2016. The group surveyed manufacturers from May 13 to 31, and 322 manufacturers from a variety of sizes, sectors and locations responded.

Almost 75 percent of respondents said that their businesses would be more competitive if a corporate tax rate of 25 percent or less was enacted as part of tax reform. The current top corporate tax rate is 35 percent.

Roughly 61 percent of manufacturers said they would be better off if a tax overhaul was enacted that included a long-term, expanded R&D credit, and 55 percent said that robust provisions on recovering the cost of capital investments would improve their competitiveness, according to the survey

Nearly 49 percent of participants said that lower rates for pass-through business income that is currently taxed under the individual tax code would make them more competitive, and 40 percent said that a "competitive international tax system" would improve their competitiveness, NAM said.

About 52 percent of the survey respondents said that they are pass-through businesses, and 77 percent of them said they would back tax reform that lowered rates for corporations and pass-through businesses but otherwise maintained the individual tax code.

NAM also asked manufacturers about regulatory burdens. Three-quarters of respondents said that concerns about taxes and regulations were a primary business challenge.

More than 80 percent of manufacturers said that their businesses' spending on compliance with federal and state regulations has increased either moderately or significantly over the last several years. Respondents said that if regulatory burdens were reduced, they would use the funds that it had previously allocated for compliance for purposes such as capital investment, hiring and training, and R&D, according to the survey.

"It should be said that manufacturers are not anti-regulation, as they recognize that rules are put in place to help protect the environment, provide a safe workplace and ensure fairness in competition," NAM said. "Yet, the cumulative burden of ever-increasing regulations does come at a cost."