Depreciation a major component
Manufacturers in Wisconsin, many stuggling from the effects of the recession, would benefit from an economic stimulus package pending in Congress, says U.S. Rep. Paul Ryan, a Janesville Republican representing Wisconsin’s First District.
"Data from the Federal Bureau of Economic Research Data is very clear," Ryan said. "This has been an investment-led recession. Disposable income went up while investment went down. The recession is manufacturing-led — and that hits Wisconsin disproportionately. In southeastern Wisconsin, our economy is heavily reliant on manufacturing."
According to Ryan, the state lost 30,000 manufacturing jobs in the current recession.
"Now that we know what led the recession, we need to focus and target our remedy toward those problems," Ryan said. "We need to stimulate manufacturing and business investments in order to prevent further job loss and to stimulate investment. Alan Greenspan is doing his job: increasing the money supply and promoting liquidity."
House, Senate versions
While stimulus packages proposed by Senate Democrats and the version passed by the House both include measures to increase depreciation allowances for capital expenditures, Ryan doesn’t think the Senate measure goes far enough.
"The Senate package was bad," Ryan said. "It increases depreciation by 10% for one year — that’s not enough of an incentive. It takes manufacturers a couple of years to put their investments in place. A one-year depreciation is the same as nothing. Our version provides 30% depreciation for three years. That is enough lead time to help manufacturers invest, get capital into their factories and put people to work. It has to be enough of an incentive over a long enough period of time."
The stimulus package changes wording in Section 179 of the expensing schedule — increasing expensing limits for all businesses. That would allow businesses to write off more investments right away.
But Ryan thinks Congress could go even further.
"What can Congress do to reduce the tax drag and penalty on investment?" Ryan pondered. "Even the Keynesians will acknowledge that we need to stimulate investment — do things that reduce the bias in the tax code."
One area of concern to Ryan is the corporate alternative minimum tax. The alternative minimum tax sets up a minimum amount of tax an entity needs to pay to prevent multiple tax write-offs and loopholes from absolving businesses of too much tax responsibility.
"The alternative minimum tax has been getting a bad rap — it increases taxes on manufacturers during recessions," Ryan said. "We are trying to prevent a tax increase on manufacturing at the same time they are hit with a recession and laying people off. We have to make sure that accelerated depreciation is not wiped out by increasing taxes. We have to make sure we give them full investment incentives."
Proposals to eliminate the alternative minimum tax have made it to the floor of the House before — most recently in February of 2001. Even in good times, relatively few companies have wound up paying the tax, but many still incur significant costs preparing the requisite form.
Ryan said that apart from measures that directly stimulate the economy, ensuring the safety of Americans traveling and engaging in commerce is also a concern.
"We have already passed a number of homeland security initiatives and bills to bring comfort, security and safety to the American people," Ryan said. "This is a prerequisite to a free-flowing economy. We need to win the war on terrorism and win the war on homeland security to allow our economy to reach its potential. We are also winning the war, which has psychosological effects on confidence."
Other legislation pending
Ryan said two other measures pending in the house of interest to businesses are efforts to reform Medicare disbursements and to extend broadband availability.
On the broadband front, the House is preparing to move on the Tauzin-Dingell bill. representatives Billy Tauzin, a Louisiana Republican, and Michigan Democrat John Dingell introduced the bill, which would reduce regulatory barriers to telecom companies interested in offering broadband Internet connectivity. However, the bill did not make it to the House floor for a vote and is not likely to be voted on until spring.
"It is going to help make sure that there are no areas left behind in getting new technology," Ryan said. "The goal is to make sure that everybody gets these new technologies. We need to put in place a level playing field so all providers can compete."
Not as fast to progress will be efforts to reform Medicare and the way reimbursement is allotted to the states.
"There won’t be any Medicare legislation until spring," Ryan said. "I am going to be fighting to scrap the entire formula system. I think we may win this fight. The question is what is going to replace it."
Sidebar — Ryan outlines coming stimulus package
U.S. Rep. Paul Ryan of Janesville said he hopes a stimulus package can be approved by both houses of Congress soon, including:
1. Benefits for laid-off workers in the form of additional unemployment compensation and help paying for health insurance.
2. Provisions to help stimulate investment on the part of manufacturers.
3. Individual tax relief geared towards those who bear an income tax burden.
4. Reductions in payroll taxes to non-income tax payers.
Jan. 18, 2002 Small Business Times, Milwaukee
