Policy and Legal

Following the events of January 2021, the processes for counting electoral votes has received renewed attention—and some members of Congress are working together to fix it.

The background: The law that governs the counting of electoral votes following a presidential election, called the Electoral Count Act, was written in 1887.

• Over the course of more than a century, the law has remained the same, even as ambiguities have caused conflicts and upheavals—most notably after the 2020 election.
• In the past two years, a bipartisan group of U.S. senators, led by Sens. Joe Manchin (D-WV) and Susan Collins (R-ME), have come together to develop the Electoral Count Reform Act, which is intended to remove ambiguities around the counting of electoral votes.

The proposal: While the ECRA is still being drafted, a few key provisions have been discussed. For example:

• The ECRA would clarify that the vice president’s role in vote counting is ceremonial, and that he or she is not empowered to throw out or change any state’s electoral votes.
• The bill raises the threshold for members of Congress to object to a state’s slate of electoral votes.
• Certain versions of the bill contain provisions that would increase election security, including by increasing penalties against individuals who threaten election officials.
• The bill would make clear that state legislatures cannot override the popular vote in their states or throw a state’s electors to someone other than the candidate chosen by their voters.
• The bill would also clear up ambiguities about presidential transition funds, ensuring that these funds can be disbursed to both candidates in the event of a disputed election in order to prevent delays.

Where we are: The current proposal has 17 cosponsors and is bipartisan. It has been through a hearing in the Rules Committee in the Senate, and it seems likely that some form of the ECRA will be considered this fall.

Our take: “The National Association of Manufacturers supports a clear, secure democratic process that doesn’t confer any partisan advantage and reduces opportunities to exploit ambiguities in the law,” said NAM Chief Legal Officer Linda Kelly. “A stable democracy is good for manufacturers and good for the world. That’s something we can all agree upon.”

The U.S. Securities and Exchange Commission has rescinded critical components of a landmark 2020 rule regulating so-called “proxy advisory firms”—and the NAM is fighting back in court.

The long road here: In 2020, after years of NAM advocacy, the SEC finalized a major rule designed to combat proxy firms’ errors and conflicts of interest.

• Proxy firms influence publicly traded companies by recommending how institutional asset managers should vote in corporate proxy contests, often without any accountability.
• The 2020 rule required proxy firms to engage with public companies and their investors, and it subjected the firms to the SEC’s anti-fraud standards.

The about-face: Beginning last year, however, the SEC’s new leadership has worked to undermine the rule, including by refusing to enforce it—an unlawful decision the NAM opposed in court. Last week, the SEC officially rescinded many of the rule’s critical reforms.

The response: The NAM has filed a lawsuit against the SEC to preserve the 2020 rule. Our complaint argues that the SEC’s actions are “arbitrary and capricious”—and that the 2022 rescission should be overturned.

The issue: Federal agencies are required to articulate a reasoned explanation for making a new policy decision—especially when that decision is based on the same facts but reaches a different outcome than a recent rule.

• In this case, the SEC finalized a compromise rule in 2020 based on a decade of bipartisan research, analysis and discussion—and no new evidence has emerged since 2020 given that the SEC prevented the rule from taking effect. So, the agency’s about-face “epitomizes ‘arbitrary and capricious’ rulemaking.”

What we’re saying: “Manufacturers depend on federal agencies to provide reliable rules of the road, and the SEC’s arbitrary actions to rescind this commonsense regulation clearly violate its obligations under the Administrative Procedure Act,” said NAM Chief Legal Officer Linda Kelly. “The NAM Legal Center is filing suit to preserve the 2020 rule in full and protect manufacturers from proxy advisory firms’ outsized influence.”

Washington, D.C. – Following President Biden’s signing of the CHIPS and Science Act of 2022, National Association of Manufacturers President and CEO Jay Timmons released the following statement:

“Every manufacturer in America will benefit from the CHIPS and Science Act, whether they make chips, make products that require chips or are part of a supply chain disrupted by the semiconductor shortage.

“Manufacturers thank congressional leaders from both parties who got this bill across the finish line and President Biden and Secretary Raimondo for their leadership. The industry will also benefit from the new law’s funding for programs to support the STEM workforce, advanced technology development, excavation of critical minerals, clean energy and more.

“Without a doubt, this legislation boosts manufacturers’ competitiveness. But there’s work to be done. Congress must continue its work on China competition legislation and move forward on policies from the U.S. Innovation and Competition Act and the America COMPETES Act that were left out, such as anti-counterfeiting measures, important trade provisions and further investments in supply chain resilience and workforce development.

“Our economic future and America’s leadership in the world depend on a competitive manufacturing industry. Congress has acted wisely with the CHIPS and Science Act. Now we need Congress to continue standing with manufacturers and focus on policies that will help us compete with China and other countries, not make it more expensive to make things in America.”

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.8 million men and women, contributes $2.77 trillion to the U.S. economy annually and accounts for 58% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

President Biden has signed into law the CHIPS and Science Act of 2022, legislation that promises to bolster manufacturers’ competitiveness, according to the NAM.

Supercharging manufacturing: “The CHIPS and Science Act [is] a once-in-a-generation investment in America itself, a law that people in America can be proud of,” Biden said today. It “supercharges our efforts to make semiconductors here in America. … [We] must lead the world in the production of these chips. This law will do exactly that.”

• NAM President and CEO Jay Timmons was on hand for the signing, along with many other business leaders.
• “Manufacturers thank congressional leaders from both parties who got this bill across the finish line and President Biden and Secretary Raimondo for their leadership,” Timmons said following the signing.

The background: The bipartisan measure, previously called the CHIPS-Plus Act, was passed by the U.S. Senate and House of Representatives in July. It provides more than $52 billion in funding to semiconductor manufacturing and scientific research.

• “Every manufacturer in America will benefit from [this legislation], whether they make chips, make products that require chips or are part of a supply chain disrupted by the semiconductor shortage,” Timmons said.

Other components: In addition to provisions for the domestic manufacturing of semiconductor chips, the CHIPS and Science Act also:

• Supports new research on critical minerals;
• Increases funding for the Department of Energy’s Office of Science, the National Science Foundation and the National Institute of Standards and Technology;
• Sets new policies for sending humans back to the moon and ultimately to Mars; and
• Expands rural STEM education.

Still work to do: Though the legislation will be a boon to manufacturers, it omits solutions to some critical challenges facing the U.S., Timmons said. These include:

• China competition legislation;
• Anti-counterfeiting measures;
• Critical trade provisions; and
• Further investments in supply chain resilience and workforce development.

Why it’s crucial: “Our economic future and America’s leadership in the world depend on a competitive manufacturing industry,” Timmons continued.

• “Congress has acted wisely with the CHIPS and Science Act. Now we need Congress to continue standing with manufacturers and focus on policies that will help us compete with China and other countries, not make it more expensive to make things in America.”

Washington, D.C. – Following the release of the text of the Inflation Reduction Act, NAM President and CEO Jay Timmons released the following statement:

“The NAM remains staunchly opposed to the IRA. It increases taxes on manufacturers in America, undermining our competitiveness while we are facing harsh economic headwinds such as supply chain disruptions and the highest rate of inflation in decades.

“We appreciate that the ‘book tax’ has been revised to reflect the importance of job-creating investments in machinery and equipment. But that is insufficient. These new taxes will still deliver a blow to our industry’s ability to raise wages, hire workers and invest in our communities. In addition, the proposed direct negotiations over prescription drugs are a form of price setting and antithetical to the open marketplace of the Medicare Part D program. Pursuing price control policies could threaten future innovation and cures.

“Any desirable elements of this bill can and should be pursued as standalone legislation. As a whole, the bill simply does not position our industry or our country for future growth or global economic leadership and competitiveness, so we urge all lawmakers to stand with us and reject it.”

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.8 million men and women, contributes $2.77 trillion to the U.S. economy annually and accounts for 58% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

The vast majority of manufacturing voters in Arizona disapprove of the U.S. Senate’s proposal to impose a “corporate minimum tax,” according to the results of a joint NAM–Arizona Chamber of Commerce & Industry snap poll yesterday.

The results: More than 90% of the manufacturing voters polled are against the tax, while 91% said it would harm manufacturers’ ability to invest in their businesses, upgrade facilities and buy new machinery.

• Respondents also said the measure would put both manufacturing jobs and the U.S. economy in jeopardy.

The NAM’s view: “With the U.S. and Arizona economies already showing signs of weakening, this is the wrong time to further undermine growth and the manufacturing sector’s overall competitiveness,” NAM Chief Economist Chad Moutray said.

• Moutray cited analyses by the nonpartisan Joint Committee on Taxation and the NAM that found the tax would disproportionately harm manufacturers.
• This tax “will make it harder to hire more workers, raise wages and invest in our communities,” Moutray continued. “Arizona’s manufacturing voters are clearly saying that this tax will hurt our economy.”

The Arizona Chamber says: “In the face of record-high inflation, supply chain backlogs and a major labor crunch, now is not the time to hammer manufacturers with new taxes,” Arizona Chamber of Commerce & Industry President and CEO Danny Seiden said.

• “Arizona job creators will continue to urge lawmakers to reject this manufacturers tax and instead focus on policies that encourage job growth and strengthen our state and national economic competitiveness.”

Washington, D.C. – The National Association of Manufacturers and Arizona Chamber of Commerce & Industry released a new snap poll today showing that an overwhelming majority of manufacturing voters in Arizona disapprove of the U.S. Senate’s plan to raise taxes on manufacturers. More than 90% of manufacturing voters opposed the tax, while 91% agreed that the tax would harm manufacturers’ ability to invest in their business, buy new machinery and upgrade facilities and put manufacturing jobs and economic recovery at risk.

“With the U.S. and Arizona economy already showing signs of weakening, this is the wrong time to further undermine growth and the manufacturing sector’s overall competitiveness. As the nonpartisan Joint Committee on Taxation analysis has shown, the corporate minimum tax is disproportionately focused on manufacturers and will limit the sector’s ability to grow and invest—in Arizona and across the country,” said NAM Chief Economist Chad Moutray. “As the survey shows and as other data indicate, it will make it harder to hire more workers, raise wages and invest in our communities. Arizona’s manufacturing voters are clearly saying that this tax will hurt our economy.”

According to recent analyses by the Joint Committee on Taxation and the NAM, the “corporate minimum tax” currently under consideration in the U.S. Senate will largely fall on the backs of manufacturers, cost almost 220,000 jobs and reduce GDP by nearly $70 billion, while reducing labor income by over $17 billion in 2023 alone.

“Arizona job creators will continue to urge lawmakers to reject this manufacturers tax and instead focus on policies that encourage job growth and strengthen our state and national economic competitiveness,” Arizona Chamber of Commerce & Industry President and CEO Danny Seiden said. “In the face of record-high inflation, supply chain backlogs and a major labor crunch, now is not the time to hammer manufacturers with new taxes.”

Background/Methodology:

Conducted by the NAM analytics team, this snap poll collected 223 responses from a statewide sample of Arizona manufacturing workers, managers and advocates. In total, 80% of the responses came via SMS text to web and 20% came via email.

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.8 million men and women, contributes $2.77 trillion to the U.S. economy annually and accounts for 58% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

The oldest forging machine at Phoenix manufacturer Valley Forge & Bolt dates all the way back to 1930. Plenty of other forging equipment was bought used and then refurbished to help the business keep down costs and maintain its generous benefits for employees. In fact, this type of equipment is the most expensive outlay of capital for the company, according to CEO Michele Clarke.

Thanks to the 2017 tax reform law, however, Valley Forge was able to buy new forging equipment for the very first time. It is “a huge game changer,” said Clarke, “when you can buy state of the art equipment.”

She said as much to Senator Kyrsten Sinema, during the senator’s visit earlier this month to Valley Forge’s facility. Along with CFO Byron Harrod, Clarke spoke to us recently about tax reform’s full range of benefits for their company—and why policymakers should not threaten the gains they and other Arizona manufacturers have made.

A small manufacturer on the rise: Valley Forge is poised to have its best sales year in its almost 50-year history, thanks in large part to the new equipment. Though the pandemic put a temporary dent in its progress, it has seen a marked jump in sales since 2017.

• The company also boosted its employment by 15 to 20% in 2018, rising to 100 workers for the first time, according to Harrod.

Benefits secured: The company makes a point of providing expansive health care coverage, with only a nominal fee for employees. The savings from tax reform has helped it maintain this commitment to employee health, as well as its 401(k) match program.

• Meanwhile, workers benefit directly from the increase in sales as well. The company has a longstanding incentives program, handing out quarterly bonuses once key goals are met.
• “Every employee gets money back if we do well,” as Clarke put it.

A better place to work: The new equipment has made Valley Forge not only more productive and profitable, but also a more comfortable working environment.

• One of the machines it purchased was robotic equipment to grind bolts. “Worst job in the company,” said Clarke. The grinding process removes forging flash so the bolts don’t cut people when handled, and it involves a lot of flying metal chips.
• “The robot probably costs close to $300,000, and we had to build a special room,” she added. It’s taken a whole year for engineers to program and set up the machine, but the benefits are worth it—“it replaces jobs that nobody wants to do.”

How tax reform helped: In addition to the lower corporate tax rate, certain other provisions in the law were crucial to the company’s equipment purchases.

• Take full expensing, which allows companies to deduct the full cost of equipment in the year it is bought. “We went each year [since tax reform] to the maximum for full expensing, sometimes more,” said Harrod.

What’s next? The company must keep adding new capacity, said Clarke, so that it doesn’t join the four or five bolting companies that go out of business around the U.S. each year. “We stay alive because of the technology we’ve developed, and we keep making it more advanced.”

• The company is beginning to produce fasteners with Bluetooth or radio frequency wireless, which can transmit information about their load and whether they have come loose right to your phone.
• It’s hoping to market these fasteners to the wind industry: “They have men who climb up the towers to tighten the bolts,” Clarke explained. “But the work life in that job is a year and a half.”
• Thanks to the new bolts, these workers would only have to make that daunting climb when they know the bolts are loosening.

This is why even the threat of a tax increase is so damaging to manufacturers, according to Clarke and Harrod. They need to be certain that their tax burden will not go up in order to plan confidently for the future.

• “Planning is paramount,” Clarke reinforced. “It takes maybe two years from when a customer first sees [a new product]” until they put in an order.

The NAM says: “Valley Forge is yet one more example of how the 2017 tax reform law helped to power growth for manufacturers,” said NAM Senior Director of Tax Policy David Eiselsberg. “Unfortunately, Congress is considering a major tax on the manufacturing sector that if implemented would reverse the gains from tax reform and hurt the sector’s future competitiveness. As it has done for the better part of year, the NAM will continue to fight against tax increases targeting manufacturers.”

The bottom line: When policymakers start talking about tax increases, “You start to cut back, you think about not replacing engineers who leave,” said Clarke. “You think the government is not on our side; let’s just cut back and make do.”

The proposed “book tax” in the Senate’s reconciliation bill “would overwhelmingly hit U.S. manufacturers,” according to a new analysis by the Joint Committee on Taxation, Congress’s non-partisan tax scorekeeper.

What’s going on: The reconciliation bill, the outline of which was released Wednesday by Senate Majority Leader Chuck Schumer (D-NY) and Sen. Joe Manchin (D-WVA), proposes a 15% minimum corporate levy, or “book tax,” on certain companies.

• The provision is estimated to raise $313 billion, and JCT finds that manufacturers would be responsible for paying nearly half of it.

What it means: The impact would be swift and devastating to manufacturers and the economy as a whole, said NAM Chief Economist Chad Moutray, who conducted his own analysis of the bill’s effects on the manufacturing sector.

Including direct, indirect and induced effects, in 2023 alone the impact would include:

• A real GDP reduction of $68.45 billion
• 218,108 fewer workers in the overall economy
• A labor-income decrease of $17.11 billion

Targeting manufacturers: “‘This is a domestic manufacturing tax, plain and simple,’” said Senate Finance Committee Ranking Member Mike Crapo (R-ID), who asked for the JCT analysis.

• “Despite Democrats’ claims, the book minimum tax does not close tax loopholes. Treatment of capital investments, like those made by American manufacturers, differ for book and tax purposes—for good reason,” according to a press release from Senate Finance Republicans.
• “Congress intentionally designed tax depreciation rules to support domestic investment. Democrats’ tax on U.S. manufacturing would eliminate that benefit.”

U.S. Senator Kyrsten Sinema (D-AZ) recently got an in-person look at manufacturing’s success in Arizona on a NAM-arranged tour of Phoenix manufacturer Valley Forge & Bolt. During her visit, which also featured a roundtable with manufacturers from across Arizona, she spoke with the NAM about the successful passage of historic infrastructure legislation without tax increases, the necessity of boosting semiconductor production and more.

• During the roundtable, Valley Forge & Bolt President and CEO Michele Clarke highlighted the direct impact of the 2017 tax reforms on her ability to invest in her facility and workforce. She thanked the senator for standing against future tax increases on manufacturers and for her leadership on infrastructure investment.

The NAM caught up with the senator after the roundtable for an exclusive interview. Here is some of what she said.

Infrastructure in Arizona: “We’ve got over $5.3 billion coming just to improve our roads and bridges in Arizona,” said Sinema. “That’s critical for the work we’re doing to shorten the supply chain. The benefits of this law will be seen for years to come.”

• “It provides a real opportunity for manufacturing businesses in Arizona to be able to utilize this energy and these dollars we’ve created to move forward, attract more companies to Arizona, and become a world leader in manufacturing.”

What’s next? “My number one goal now that this [infrastructure] bill has become law is to make sure that it’s implemented quickly, swiftly, and without bureaucracy,” said Sinema.

• “I want to make sure Arizona is getting its fair share of dollars so that the men and women who are running and working for our manufacturing companies can put these dollars to good use and make sure Arizona retains and grows its status as a domestic manufacturer.”

Creators Wanted: “There’s a need for us to really focus on investment in our education system so that we’re training the highly qualified tradesmen and tradeswomen who can do the work of this domestic manufacturing,” said Sinema. “That’s an area where we have an opportunity to grow, not just here in Arizona but across our nation. To meet this need so we can retain our global independence and competitiveness.”

Chips: “Arizona is already a hub for the microchip and the semiconductor industry; but passing the CHIPS Plus legislation will allow us to triple or even quadruple that investment,” said Sinema. “It’s incredibly important for us—not just for the tax credit and the investment in R&D—but for the tech hubs, for the investment in science, and to help attract more companies to build semiconductors right here in Arizona.”

The last word: “Manufacturing is the bread and butter of our state,” said Sinema. “It ensures that Arizona is a hub to the nation and the entire world in making products that will power our economy for the future.”

Read more: Check out the local coverage of the senator’s visit from the Daily Independent and the Phoenix Business Journal (subscription).