With comprehensive tax reform on the Congressional front-burner, paper and wood products manufacturers are educating lawmakers on the tax profile of the industry and the possible effects of wholesale reform of the tax code. Our priority is to ensure that any changes result in improved economic growth, job opportunities and the competitiveness of U.S.-based forest products businesses.
The U.S. forest products industry accounts for approximately 4.5 percent of the total U.S. manufacturing GDP. Our companies produce about $200 billion in products annually and employ nearly 900,000 men and women, exceeding employment levels in the automotive, chemicals and plastics industries. They meet a payroll of approximately $50 billion annually and rank among the top 10 manufacturing sector employers in 47 states. Our companies and their business structures take many forms including C-Corps, S-Corps, partnerships and others.
Our industry is capital-intensive and operates in a highly competitive international marketplace. Comprehensive business tax reform should allow for economic growth and improve the competitiveness of important job-creating sectors, including the U.S. forest products industry. Between 2006 and 2011, our industry has invested $52 billion in new equipment and production capability
We are leaders in the field of renewable energy, generating electricity and other usable forms of energy for operations. Our businesses offer robust family-wage and benefits — earnings of pulp and paper mill workers exceed the average for all U.S. private sector workers by about 50 percent. And, our industry exceeds the average for all manufacturing in value-added per dollar of shipments.
Paper and wood products manufacturers also support jobs in other sectors of the U.S. economy. For instance, a study conducted by the Economic Policy Institute found that each paper industry job supports 3.25 jobs in supplier industries and local communities from re-spending and tax receipts. Additionally, the United States is a net exporter of pulp and paper products.
Priorities for comprehensive federal tax reform:
- Tax rates – The United States has the highest statutory corporate tax rate among OECD countries. This is because most other OECD member countries have lowered corporate rates during the past two decades, while U.S. corporate rates have remained stagnant. A significant reduction in all taxes on U.S. business income is needed to be more in line with the average among other OECD countries. A tax system with the lowest possible tax rates is desirable to foster capital investment, jobs creation and economic growth.
Business investment -Business investment is another crucial driver of economic growth and jobs. Appropriate treatment of depreciation, interest expense, and research expenditures to ensure capital intensive manufacturers — such as paper and wood products companies – continue to invest in new and more efficient equipment.
- International tax rules – The global market place is more competitive than ever and home country tax systems can provide a competitive edge as companies seek to enter new markets and compete in existing markets. Unfortunately, the United States has fallen behind when most OECD countries have moved to competitive tax regimes. The U.S. international tax rules should be reformed to include a competitive territorial tax system like those of many other countries so that U.S.-based companies can compete on a level playing field in vital global markets.
- Employees benefit provisions – The U.S. forest products industry is a leader in providing excellent employee payroll, retirement and health benefits to its workers. Changes in tax law could have a dramatic effect on companies’ ability to continue these benefits.
- Transition relief – Major changes in federal tax policy could have a negative impact on existing business investment and create considerable uncertainty. Appropriate transition relief and protections against retroactive tax law changes are essential elements for federal tax reform. For example, the full benefit of net operating losses and unused tax credits should be protected and allowed to be carried forward to future years.
Maintaining a vibrant U.S. paper and wood products manufacturing sector is essential to our nation’s economy. We hope lawmakers will resist the temptation to pick winners and losers among businesses and avoid counter-productive tax increases that will be harmful to economic growth and job creation. A reformed tax code should provide a level playing field for business activity, allowing our businesses to compete in the domestic and global marketplace.