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US needs investment tax strategy: let your congressman know.

Let your congressman know:

US needs investment tax strategy

Another presidential election year is upon us and with it comes a flood of tax schemes. Although cloaked in the respectability of promoting some social good, each is designed to win votes. Sen Patrick Moynihan wants to lower the Social Security tax rate by raising the wage base subject to the tax and cutting spending on defense, the CIA, and the Space Station. The Gore-Downey plan would boost the tax credit per child under 18 and restore charitable deductions and pay for it with an 11% surtax on capital gains. Sen Bentsen would take the peace dividend that comes from reduced defense spending and restore credits for IRAs. Tax czar Rostenkowski wants a 35% tax bracket for higher-paid individuals to help pay for income tax credits he'd allow for 20% of the Social Security and Medicare taxes paid by individuals.

Each is designed to spur the economy by giving the middle-class consumer more buying power; as if $300 or $400--that's about all any of the tax cuts would amount to--would spur much buying. Even so, chances are that much of any extra consumer dollars would be used to snap up more imports. Result: any economic spur would accrue to the foreign country providing the import causing even more US manufacturing jobs to be lost.

To compete within the complexities of the global economy and create jobs will take savings, not spending; it'll require investment in the domestic manufacturing base. An example of just what US manufacturers are up against comes from Daniel D DeChamps, president of the US subsidiary of German-based Trumpf Inc, a punch-press manufacturer. He tells me that 70% of the equipment they use in their European manufacturing facilities is less than four years old. Trumpf is not unique among foreign competitors in its investment strategy. In contrast, US Bureau of Economic Analysis statistics show the average age of metalworking machinery in the US fabricated-metal-products industry is almost 11 years.

Other statistics confirm that the US is at a technological disadvantage when it comes to competing with aging equipment which, perhaps, can still do a job, but can hardly keep up with younger, faster, more productive equipment. Automotive investment in metalworking machinery has been weak for a decade; new investment hasn't managed to offset depreciation. As a result, in the past decade the equipment it uses has aged, on average from 6.5 to almost 8 years--that in a period when increasing foreign competition dictates accelerating investment to keep up with racing technological change, faster product obsolescence, and higher quality demands. The number of foreign labels plying US roads depicts the consequences of short-sighted investment strategies.

It'll do little good to give consumers tax breaks if they aren't working or making enough to pay taxes. The economy doesn't need spending stimulus, it needs investment. Not just any investment, but rather tax policies specifically designed to bolster the US manufacturing base.

As we move into this election year, that's the message we must get across to the politicians; that's where the political debate has to be focused. It is none too soon to start. Let your congressman or senator know how you feel today.
COPYRIGHT 1992 Nelson Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Modic, Stanley J.
Publication:Tooling & Production
Article Type:Editorial
Date:Jan 1, 1992
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