For the talking heads on cable news, the issue of tax reform has been reduced to a series of short talking points. For my company, the status quo is hindering our growth.
My family business, Patriot Aluminum Products, based in Louisa, Virginia, is the only American-owned-and-operated family business producing the full lines of aluminum and stainless electrical conduit products. We started operations in 2010. We currently employ 62 employees, which will grow to 75 by the end of the year.
Innovating to stay ahead of the curve and foreign competition is hard enough, but the complicated tax and regulatory environment adds an additional hurdle for small businesses to overcome. In order to encourage more hiring and growth in small businesses, my message to Congress and the administration is simple: make taxes and regulations more predictable and less burdensome on American small businesses like mine.
We plan to purchase over $1.5 million in new equipment this year to keep up with the demand of our customers. Unfortunately, our growth has also brought increasing complications. The equipment used to make our products isn’t cheap and requires regular maintenance. Currently our operation runs three shifts, five days a week, with our third shift operating fully automated. In order to achieve this productivity and keep our customers happy, we utilize thirteen automated CNC machines, which accounts for $2 million in cost.
Because of this constant growth and innovation, full expensing in tax reform is incredibly important to businesses like ours. Full business expensing would allow instant write-offs instead of scheduled depreciation, and this would spur new investment in our business, meaning a greater opportunity to re-shore foreign-made products, creating more jobs, higher incomes, and added certainty.
Private companies like Patriot Aluminum still pay some of the highest taxes in the industrialized world. A reduction to the small business tax rate would be a welcome relief for family business owners, many of which are also paying state income tax, sales tax, healthcare taxes, and LLC fees. The average family business spends over 80 hours to prepare thousands of pages of tax forms each year. Complying with this number of tax responsibilities can truly turn into a second job for a small business owner.
Fortunately, the president’s new tax plan addresses many of the unnecessary complications by reducing the complexity of the tax structure. Small businesses should be making decisions based on industry needs and their customer base, not the whims of Washington bureaucrats.
As a growing family business with many productive years ahead, the estate tax, or “death tax” could pose a significant risk to Patriot’s future. Critics often label the estate tax as a “tax on the rich,” but even businesses that don’t currently exceed the exemption must begin the costly estate planning process early. The result is a drain of capital from businesses of all sizes that is wasted on lawyers and accountants.
As my business grows it becomes increasingly concerning to me that if I die unexpectedly, the government may demand 40 percent of my business in death taxes. To have products on hand for our buyers, Patriot maintains inventories in ten states, and these multi-million dollar, non-liquid inventories are a part of the valuation of my business. Without liquid cash on hand to pay a 40 percent tax bill, we may be forced to sell parts of the business or lay off workers just to pay Uncle Sam.
As a business owner grappling with a number of taxes and regulations, I’m encouraged by efforts in Congress to simplify and reform the tax code. For us, the tax savings will be invested back into Patriot Aluminum to expand the business and increase hiring.
Investing in the futures of our employees at Patriot Aluminum means everything – approximately half of our production workforce are U.S. Military Veterans. With small businesses like mine seeking tax relief to invest in more growth, now is the time to pass a tax reform package that encourages entrepreneurs to dream big, work hard and restore America’s Manufacturing Leadership.
Tom Click is President and CEO of Patriot Aluminum in Louisa, Virginia.
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