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How a Tax Change Will Strangle a Small Manufacturer’s R&D

By NAM News Room

Marlin Steel Wire Products spent its first 30 years making bagel baskets. When Drew Greenblatt bought the custom wire and metal fabrication company in 1998, he thought it would be making bagel baskets for the next 30 years as well—but soon, international competition changed the math.

“Suddenly, China started manufacturing bagel baskets and shipping them to New York City for cheaper than I could get the steel,” said Greenblatt, Marlin’s president and owner. “But then, we got a phone call from an engineer at Boeing who needed an innovative, customizable basket. And that was the eureka moment.”

The shift: Greenblatt recognized that innovation would help him outcompete foreign companies that could manufacture products more cheaply. 

  • “We realized we couldn’t thrive in a commodities market,” said Greenblatt. “We had to come up with novel ways to make a basket so that it would make no financial sense to buy from China or Mexico.”
  • “We wanted to be able to say to buyers, you must buy from the American innovative company, because we’re coming up with such slick ideas that our product blows the competition away.”

The growth: Today, Marlin Steel is nearly 30 times larger than it was when Greenblatt bought it and heavily invested in research and development. 

  • “Today, Marlin is 15% degreed mechanical engineers,” said Greenblatt. “We have chemical engineers. We’re coming up with the most innovative racks and systems out there.”
  • “People are showing us their operations and asking us to reverse-engineer solutions that will work for them. And we’re doing it.”

However . . . A recent tax change threatens to throttle the company’s progress. Until about a year ago, businesses could deduct 100% of their R&D costs in the same year they incurred those expenses.

  • But since last year, a tax policy change now requires businesses to spread their R&D deductions out over a period of five years, making it much more expensive to invest in innovation.

Read the full story here.

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