Tag Archives: NAM

Mixed Appreciation for Depreciation

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For some 15 years, the electronics manufacturing industry has pushed for changes to the US capital equipment depreciation laws.

In fits and starts, various groups have converged on Washington and lobbied legislators to shorten the five-year cycle for fully depreciating new machines, saying the move would make the US more competitive with other manufacturing-reliant nations. Thanks in part to 9/11 and subsequently in response to economic cycles, lawmakers have from time to time accelerated the schedule to three years and raised the amount small businesses could write off.

This week, President Obama offered full capital depreciation (and also said he would make permanent the much-sought-after research and development tax credit), but with a catch: American businesses would no longer get tax breaks to launch operations offshore.  “There is no reason why our tax code should actively reward them for creating jobs overseas,” Obama said.

The National Association of Manufacturers supports the accelerated depreciation laws (it would be hard to see why it wouldn’t), but reportedly has come out against the other proposed changes to the tax code. As I’m sure NAM is aware, by statute hits to the US Treasury must be made up elsewhere. Politics is the art of compromise and tradeoffs.  I would urge our industry trade groups to collectively agree on what the electronics industry can afford to live with, and what it can’t — and fast. They will be much more effective if they speak with a unified voice.

Trading in on Climate Bill

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Tucked away in the climate change bill introduced in the US Senate this week by John Kerry (D-MA) and Joe Lieberman (I-CT) is a provision that calls for unilateral US action against any nations that have not enacted emissions limits.

Specifically, the American Power Act states that, pending the enactment of a global agreement on climate change by Jan. 1, 2020, imports from non-compliant countries would be subject to a tariff to avoid “carbon leakage” (i.e., the transfer of manufacturing operations to sites with lower emissions standards).

In a nod to World Trade Organization agreements, the senators assert this “border adjustment” would comply to WTO rules (see page 3).

NAM’s response to the bill was mixed, and focuses more on other aspects of it, specifically provisions for offshore drilling.

The potential ramifications of such a law are interesting, especially in light of China’s (aka The World’s Workshop) resistance to almost any form of external environmental pressure. Certainly the world will be a very different place in 10 years, and it’s impossible to know whether technology and other innovations will have allowed the US to wrest back control over certain manufacturing markets. But personally, I don’t think this bill has any chance of becoming law, so it’s probably a moot point.