BY DAVID KRECHEVSKY, REPUBLICAN-AMERICAN
Anyone saving for retirement can use an individual retirement account to build a nest egg while also reducing their tax burden. Some federal and state legislators want to use a similar idea to help manufacturers reinvest in their businesses.
For the second straight year, Rep. Rosa L. DeLauro, D-3rd District, has proposed in Congress the Manufacturing Reinvestment Account Act, a bill with bipartisan support that would allow American manufacturers to use some of their profits while also reducing their taxes.
Under the revised bill, manufacturers could establish a Manufacturing Reinvestment Account, or MRA, at a community bank and deposit up to $500,000 a year for seven years. The money would be contributed "pre-tax," reducing the amount of a company's profits that would be taxed.
Money taken from the account would be taxed at 15 percent, and could only be reinvested in the business - for buying equipment, expanding a facility, or for work force training. It could also serve as collateral for a business loan.
A similar bill has been proposed in the state legislature. Rep. Jeffrey J. Berger, D-73rd District, said the Commerce Committee is raising a bill to allow all manufacturers in the state to establish a Manufacturers Reinvestment Fund. It would allow them to save up to $250,000 for up to five years pre-tax. Upon withdrawal, the money would be taxed at 11 percent and could be used only to reinvest in the business.
Together, the two bills would provide a generous reduction in federal and state taxes while encouraging manufacturers to grow.
"If we want our nation to continue to be successful and competitive in the global marketplace, we must return to an outlook in America that prizes and supports domestic manufacturing," DeLauro said. "I believe that we need to move away from being a nation that simply buys things, and return to a nation that builds things right here. The Manufacturing Reinvestment Account Act does this, enabling America's manufacturers to invest in their business and get a bigger return on their hard-earned dollars."
Manufacturers say the legislation would have wide benefits.
"Anything that's going to allow anybody in manufacturing to be able to set aside funds that can give them a tax benefit and keep business and manufacturing in the area is a plus," said Gerry L. Mastropietro, vice president Hubbard-Hall Inc. of Waterbury and president of the Smaller Manufacturers Association, which has 130 member companies.
"Our members are not large corporations," Mastropietro said, "and a lot of our members welcome and need these types of programs in order to be able to sustain growth and employ people in the area."
Jerry Clupper, executive director of the New Haven Manufacturers Association, said the bill will indirectly help create jobs.
"The thing politicians seem to miss ... is that companies have to have more demand than they can meet in order to hire more workers," he said. "They need the economy to ramp up the demand in order to get to a position to hire more people."
Creating a way to invest in new equipment or expand facilities that will allow manufacturers to take on additional work is a step toward creating new jobs, he said.
Jamison J. Scott, vice president of Air Handling Systems in Woodbridge, has been working in support of DeLauro's bill. He said capital investment has been hampered because banks have made it difficult qualify for loans. The federal and state bills should ease bankers' concerns, he said.
"If we go to a bank to borrow money, now they know we're good for it," Scott said. "They know we've got a good down payment, and they will be much more comfortable lending that money to a manufacturer."
The federal bill allows the MRA to be created only at "community banks," or those with assets of $25 billion or less. That includes Webster Bank, which has about $18 billion in assets, and People's United Bank, which has about $22 billion in assets.
Both bills still have a long way to go before becoming law. DeLauro's bill, in fact, never got out of committee last year. But the manufacturers are more confident this time.
"We knew it wasn't going to go anywhere last year with the election," Scott said. "This is the year to really push it."
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