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Cutting corporate taxes while reducing energy taxes and federal regulations are necessary to improve the U.S. manufacturing base and compete on a global scale, a steel fabricator testified before lawmakers on Capitol Hill. A 50-percent reduction in the 36-percent corporate tax rate would keep domestic companies competitive with Canada, Marlin Steel Wire Products LLC president Drew Greenblatt said in testimony before the House Committee on Energy and Commerce. And he urged lawmakers to simplify the tax code “to a postcard tax return so owners are spending their time and energy on building stuff instead of filling out forms.”
Baltimore-based Marlin is among the 70 percent of manufacturers classified as S-corporations, which file taxes at the individual rate, Greenblatt said, and his company’s tax rate is higher than its global trading partners, which makes growing domestic sales all the more challenging.
“Foreign rivals have lower obstacles to succeed. They can reinvest more profits into building the company than Marlin can,” he said.
“A pro-manufacturing tax policy must first acknowledge that when Congress raises taxes it makes manufacturers in the U.S. less competitive. Marlin Steel’s tax rate is higher than its global trading partners like Canada, where companies pay perhaps half as much in taxes—18 percent compared to our approximately 40 percent,” he testified.
Manufacturing jobs can boost the living standard of the middle class as these positions are generally paid 22 percent more than the rest of the work force, Greenblatt said. “In 2009, the average U.S. manufacturing worker earned $74,447 annually, including pay and benefits. More than half of my employees own their own home. Manufacturing creates solid middle-class jobs.”
Marlin exports to 34 countries, including China, while managing to source all of its material domestically, he said. “Marlin exports to China, which is particularly difficult since Marlin’s workers are paid 60 times more than Chinese workers. In fact, Marlin’s workers’ compensation insurance alone is more than three times the average Chinese person’s wages. That means Marlin Steel must pay insurance premiums in one hour that could hire three workers at a competitor’s factory in China.”
The red tape caused by federal regulations is another cumbersome task that prevents executives from concentrating on core business, Greenblatt said. “These disadvantages make it challenging for U.S. factories to grow and thrive in the U.S. Foreign manufacturers often must comply with fewer regulations and have governments that use every tool at their disposal to give those companies a competitive edge, frequently at the expense of manufacturers in the United States.”
Establishing the United States as a prime location for a global headquarters, encouraging manufacturers to choose America over offshore venues and stepping up research and development efforts are crucial components of a comprehensive strategy, Greenblatt said.