Tax code hurts job growth, Springfield businessman says
The tax code’s complexity and increases in tax rates has made it more difficult to add jobs in Clark County, argued a Springfield business owner as he testified in the U.S. House on Wednesday.
Competitive tax rates for small businesses are critical, especially in industries like manufacturing, said Dan McGregor, chairman of the McGregor Metalworking Companies. The family business started in 1965 and now has four companies in Springfield and one in South Carolina, employing about 375 workers.
McGregor testified Wednesday in Washington D.C. before the House Committee on Small Business. The goal of the hearing was to gather information as part of a long-term effort to reform the federal tax code, said Chairman Steve Chabot, a Republican Congressman from Cincinnati.
“The message we hear is always the same,” Chabot said. “We’ve got to make it simpler, flatter and fairer. And taxpayers want Congress to enact changes in the code earlier in the year, or better yet, make certain beneficial tax provisions permanent so they can plan ahead.”
Officials from Democratic U.S. Sen. Sherrod Brown’s office and liberal-leaning think tanks couldn’t be reached for comment Wednesday.
McGregor’s companies are focused in the metal industry, performing jobs like stamping, welding, and assembly for customers in several industries, including agriculture and automotive. Earlier this year, the company was named a Tier I supplier for Honda, expanding the company’s role shipping parts to the automaker.
Taxes have risen for small businesses in recent years, McGregor said, which has made it tougher to hire new workers.
“We look at our taxes as another cost in a highly competitive, low-margin business,” McGregor said in written testimony to the committee. “Almost all of our customers ask us for price decreases each year ranging from 1 to 3 percent. Contract manufacturing is under heavy competition pressure from global and internal competition within our customer base.”
The tax rate on the McGregor Metalworking’s shareholders increased from roughly 33.3 percent to 41 percent after an agreement in 2013 that prevented the so-called “fiscal cliff.” The fiscal cliff was a series of tax increases and spending cuts that were scheduled to take effect in 2013.
The company previously paid about 34 cents of every dollar earned to pay taxes, but that figure is now closer to about 42 cents per dollar devoted to federal, state and local taxes, McGregor said.
“Having McGregor’s effective tax rate rise from 34 to 42 percent means lots of lost job opportunities,” he said.
McGregor also argued any revision to the tax code should be comprehensive and include reforms that benefit both corporate firms as well as pass-through businesses like McGregor Metalworking, which are taxed differently.
Simplifying the tax code is key to helping small businesses like McGregor’s grow, said U.S. Speaker John Boehner, R-West Chester, in a statement.
“Today, it is outdated and complicated and no one knows that more than family owned and operated businesses, like McGregor Metalworking in Springfield,” said Boehner, who represents Clark County.
