[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]





                        TAX REFORM AND THE U.S.
                          MANUFACTURING SECTOR

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 19, 2012

                               __________

                           Serial No. 112-28

                               __________

         Printed for the use of the Committee on Ways and Means




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                      COMMITTEE ON WAYS AND MEANS

                      DAVE CAMP, Michigan,Chairman

WALLY HERGER, California             SANDER M. LEVIN, Michigan
SAM JOHNSON, Texas                   CHARLES B. RANGEL, New York
KEVIN BRADY, Texas                   FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
GEOFF DAVIS, Kentucky                XAVIER BECERRA, California
DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
CHARLES W. BOUSTANY, JR., Louisiana  MIKE THOMPSON, California
PETER J. ROSKAM, Illinois            JOHN B. LARSON, Connecticut
JIM GERLACH, Pennsylvania            EARL BLUMENAUER, Oregon
TOM PRICE, Georgia                   RON KIND, Wisconsin
VERN BUCHANAN, Florida               BILL PASCRELL, JR., New Jersey
ADRIAN SMITH, Nebraska               SHELLEY BERKLEY, Nevada
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas
ERIK PAULSEN, Minnesota
KENNY MARCHANT, Texas
RICK BERG, North Dakota
DIANE BLACK, Tennessee
TOM REED, New York

        Jennifer M. Safavian, Staff Director and General Counsel

                  Janice Mays, Minority Chief Counsel












                            C O N T E N T S

                               __________

                                                                   Page

Advisory of July 19, 2012 announcing the hearing.................     2

                               WITNESSES

Ms. Diane Dossin, Chief Tax Officer, Ford Motor Company, 
  Testimony......................................................     7
Mr. Henry W. Gjersdal, Jr., Vice President of Tax and Real 
  Estate, 3M, Testimony..........................................    13
Ms. Susan L. Ford, Vice President of Tax, Corning Inc., Testimony    20
Mr. Ralph E. Hardt, President, Jagemann Stamping Company, 
  Testimony......................................................    26
Mr. Kim Beck, President and CEO, Automatic Feed Company, on 
  behalf of the Association for Manufacturing Technology, 
  Testimony......................................................    37
Mr. Hugh Spinks, Vice President of Tax, Air Liquide USA, Inc., 
  Testimony......................................................    44
Ms. Heather Boushey, Ph.D., Senior Economist, Center for American 
  Progress, Testimony............................................    48

                       SUBMISSIONS FOR THE RECORD

3M...............................................................   103
American Council for Capital Formation...........................   107
Advanced Medical Technology Association..........................   119
American Fuel & Petrochemical Manufacturers......................   131
American Chemistry Council.......................................   134
Biotechnology Industry Organization..............................   140
Center for Fiscal Equity.........................................   144
Ernest Christian.................................................   150
Hanes Brands Inc.................................................   158
LIFO Coalition...................................................   160
National Association of Manufacturers............................   209
R & D Credit Coalition...........................................   214
Scott Bucknell...................................................   220
Semiconductor Industry Association...............................   223
Society of Chemical Manufacturers & Affiliates...................   233
Stephen Entin IRET 1.............................................   234
Stephen Entin IRET 2.............................................   239
Stephen Entin IRET 3.............................................   240
U.S. Chamber of Commerce.........................................   243
U.S Steel Corporation............................................   251
William Lee......................................................   259

 
                           TAX REFORM AND THE
                       U.S. MANUFACTURING SECTOR

                              ----------                              


                        THURSDAY, JULY 19, 2012

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                                    Washington, DC.

    The committee met, pursuant to call, at 9:43 a.m., in room 
1100, Longworth House Office Building, the Honorable Dave Camp 
[Chairman of the Committee] presiding.

HEARING ADVISORY

 Camp Announces Hearing on Tax Reform and the U.S. Manufacturing Sector

Thursday, July 19, 2012

    Congressman Dave Camp (R-MI), Chairman of the Committee on Ways and 
Means, today announced that the Committee will hold a hearing on 
business tax issues currently facing U.S. manufacturing companies, and 
will examine how comprehensive tax reform could improve the ability of 
manufacturers to contribute to job creation and economic growth, 
including U.S.-based public and closely held companies as well as 
foreign-owned U.S. manufacturers. The hearing will take place on 
Thursday, July 19, 2012, in Room 1100 of the Longworth House Office 
Building, beginning at 9:30 A.M.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing. A list of invited 
witnesses will follow.
      

BACKGROUND:

      
    The United States has the highest corporate income tax rate in the 
developed world at 39.2 percent (federal and state combined)--compared 
to the OECD average of approximately 25 percent--and recent economic 
research indicates that much of the corporate tax is borne by workers 
in the form of lower wages and fewer jobs. In addition, U.S. 
manufacturers that operate internationally are subject to tax on their 
worldwide earnings, while their competitors in foreign markets often 
are based in countries with a territorial system that does not tax 
foreign earnings, putting U.S. manufacturers at a competitive 
disadvantage.
    Furthermore, a substantial portion of manufacturing activity by 
U.S. companies is conducted through pass-through entities, and income 
earned by these entities is taxed at the individual income tax rates. 
Consequently, uncertainty surrounding the individual rate structure 
after 2012 poses significant challenges to business planning and job 
creation in the manufacturing sector, especially for smaller 
manufacturers further down the supply chain.
    In announcing this hearing, Chairman Camp said, ``U.S. 
manufacturing has long been a cornerstone of our economy, and it 
continues to provide high-paying jobs for American workers while 
supplying global consumers with high-quality products. As with the rest 
of our economy, however, the strength of U.S. manufacturing is being 
undermined by our current tax system, which is too complex, too costly, 
and too time-consuming to comply with. As we examine the implications 
of comprehensive tax reform for specific industries, I will be 
interested in hearing from U.S. manufacturers about how tax reform can 
make the United States a more attractive place for the industry to hire 
and invest.''
      

FOCUS OF THE HEARING:

      
    This hearing will examine how the current tax system affects U.S. 
manufacturers, including U.S.-based public and closely held companies 
as well as foreign-owned U.S. manufacturers, and how comprehensive tax 
reform might affect their ability to expand and create jobs.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
written comments for the hearing record must follow the appropriate 
link on the hearing page of the Committee website and complete the 
informational forms. From the Committee homepage, http://
waysandmeans.house.gov, select ``Hearings.'' Select the hearing for 
which you would like to submit, and click on the link entitled, ``Click 
here to provide a submission for the record.'' Once you have followed 
the online instructions, submit all requested information. ATTACH your 
submission as a Word document, in compliance with the formatting 
requirements listed below, by the close of business on Thursday, August 
2, 2012. Finally, please note that due to the change in House mail 
policy, the U.S. Capitol Police will refuse sealed-package deliveries 
to all House Office Buildings. For questions, or if you encounter 
technical problems, please call (202) 225-3625 or (202) 225-2610.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word format and MUST NOT exceed a total of 10 pages, including 
attachments. Witnesses and submitters are advised that the Committee 
relies on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.

                                 

    Chairman CAMP. Good morning, thank you for joining us for 
another in a series of hearings examining how comprehensive tax 
reform can help stir economic growth. Today's hearing is an 
opportunity to look more closely at the manufacturing industry. 
Specifically, we will examine how the current tax system 
affects U.S. manufacturers, including U.S.-based public 
companies, small and closely-held manufacturers, and foreign-
owned U.S. manufacturers. We will also explore how 
comprehensive tax reform might affect manufacturers' ability to 
expand and create jobs.
    The importance of the manufacturing sector to the U.S. 
economy has been well-established. In 2011, manufacturing 
accounted for 12.2 percent of the country's gross domestic 
product, and approximately $1.27 trillion in exported goods 
according to the Commerce Department's of Bureau of Economic 
Research. With a long and treasured history in America, 
manufacturing touches every aspect of our lives. From the food 
we eat, to the cars we drive, to the clothes we wear, the 
impact of manufacturing is felt each and every day.
    Supporting about one in six private sector jobs, the 
manufacturing industry is a cornerstone of our economy that 
provides high-paying and high-quality jobs to approximately 12 
million people according to June's Labor Department data. 
Manufacturing is closely connected with research and innovation 
which improves our lives and our standard of living.
    Whether small, medium, or large, whether publicly traded or 
closely held, manufacturing companies contribute to the 
American economy every day. Nowhere is that more evident than 
in my home State of Michigan, the heart of the auto industry 
and the engine of the industrial Midwest. Manufacturers have 
been hit particularly hard in this country.
    Since the President took office, we have lost over one-half 
million American manufacturing jobs. According to the 
Department of Labor, the precise number is 590,000. So as we 
examine the effect of our current Tax Code as well as the 
implications of comprehensive tax reform, the importance of 
understanding how tax reform can make America a more attractive 
place for the industry to hire and invest can't be overstated.
    A recent op ed offered by the National Association of 
Manufacturers sums up the challenges posed by today's Tax Code, 
stating manufacturers have added 13 percent of the net new jobs 
gained since the end of 2009. And we have made larger than 
normal contributions to gross domestic product. But there is a 
black cloud looming with much uncertainty ahead. The op ed goes 
on to describe the impact that those looming tax increases will 
have on manufacturers, both for individual and corporate 
taxpayers. Citing a recent survey, 64 percent of manufacturers 
describe the tax and regulatory environment as their top 
concern.
    The concern expressed by the manufacturing community is 
well founded, and it is a concern shared by many on this 
committee and in the Congress. We are all familiar with the 
statistics. The United States has the highest corporate tax 
rate in the world at 39.2 percent if you combine Federal and 
State. The high corporate rate in our outdated worldwide system 
of taxation do little to attract the investment and hiring we 
need to help get America back to work.
    Similarly, as the NAM-authored op ed reminds us, businesses 
paying at the individual rate are also affected by today's 
broken Tax Code; not to mention its December 31st expiration 
date.
    If the tax relief originally enacted in 2001 and 2003 
expires, then 2/3s of manufacturers that operate as pass-
through entities and pay taxes at the individual rate, will 
face even higher tax bills. The bottom line is that today's Tax 
Code isn't working. It is not working for the manufacturers 
that are organized as pass-through entities because it is too 
complex, too costly, and too expensive to comply with. It isn't 
working for manufacturers who operate internationally because 
it is outdated, and leaves America uncompetitive in the global 
marketplace.
    Most of all, it is not working because it is not helping 
families struggling in a weak economy get back to work. It is 
time America's Tax Code puts the America economy first. We know 
that what doesn't work and now it is time for a comprehensive 
tax reform plan that will work. Since this Congress convened in 
January of 2011, the Ways and Means Committee has had more than 
20 hearings focused on the steps Congress might take to 
transform our broken Tax Code into a pro-growth Code that will 
provide employers the certainty, the flexibility and freedom 
they need to invest and hire. At the request of the Ways and 
Means Committee, the last two House-passed budgets have 
outlined a framework for comprehensive tax reform that lowers 
rates for individuals and corporate taxpayers, repeals the AMT 
for 31 million households and transitions America to a more 
competitive territorial system of taxation, which even the 
Obama administration pointed to as a ``hopeful area of 
consensus.''
    The framework is a good start, but more must be done. Today 
we will hear directly from stakeholders in the manufacturing 
community as they share their ideas for what Congress can do to 
help and what we ought to avoid that might hurt.
    Your voices are critical to this discussion and after all, 
it is not enough simply to write a plan that reads well in 
Washington. It has to be a plan that works in the real world, 
the world where you run your businesses. Thank you for taking 
the time to be here today and I look forward to your testimony. 
I will now yield to Ranking Member Levin for his opening 
statement.
    Mr. LEVIN. Thank you, and welcome to each and every one of 
you. Thank you for coming.
    During the 2000s, we experienced a crisis in manufacturing 
employment. During the 8 years of the Bush administration, we 
lost 4.5 million manufacturing jobs. Now, since the recovery 
has taken hold, the manufacturing sector has added about a half 
a million jobs. We have seen that gain in manufacturing 
employment over the last 2 years. And now we hear talk about a 
resurgence of American manufacturing in part because of the 
policies of this President.
    The President took the difficult but vital step of 
providing assistance to the domestic auto industry. If he 
hadn't done that, it would have devastated the manufacturing 
sector well beyond the Big Three, and even beyond their 
suppliers.
    The Recovery Act Included key provisions like the 48C 
credit to encourage investment in advanced energy 
manufacturing. The tax agreement at the end of 2010 included 
100 percent bonus depreciation for capital investments. But 
more needs to be done, clearly. We are still below where we 
were at the end of the Clinton administration by about 5 
million manufacturing jobs. Ways and Means Democrats, we here 
have introduced a no-excuses agenda of items like bonus 
depreciation, the Wind Credit, R&D, 48C, Build America Jobs, 
and a provision to reduce the incentive to ship jobs overseas 
that this committee should act on immediately to promote job 
creation, especially in the manufacturing sector.
    This committee should act on these provisions as soon as 
possible. Today we are considering how manufacturing fits into 
tax reform. Tax reform must fit into support for manufacturing. 
Eliminating every corporate tax expenditure including the 
domestic manufacturing deduction, R&D, and accelerated 
depreciation, would not pay for reducing the corporate rate to 
25 percent, and could work against further support for 
manufacturing.
    The President and Democrats in Congress view, in terms of 
tax reform, the larger goal as one of economic growth and job 
creation. Just setting a rate and not saying how you will get 
there doesn't really tell you whether you are achieving those 
goals or not.
    We think manufacturing should be at the heart of our goals 
for tax reform. Manufacturing still provides millions of 
middle-class jobs, conduct more than 2/3 of private R&D, 
accounts for 60 percent of exports, and has vital positive 
spillover effects in the broader economy.
    Secretary Geithner said this very well before this 
committee in February. He said, and I quote, ``I would say we 
would look at any proposal through that simple test which is 
relative to what you face today, are we making it more likely 
that the next factory by a U.S. company or a foreign company 
will be built here?''
    Republicans often say that they don't want to pick winners 
and losers. It is not picking winners or losers, it is picking 
what side you are on. Being on the side of those who want to 
build things in America is not picking winners and losers, but 
winners for the American public.
    That is why we think tax reform needs to mean a great deal 
for manufacturing sector. That is a major purpose of the 
hearing today, and we look forward to hearing our witnesses' 
thoughts on how we achieve that goal. Thank you.
    Chairman CAMP. Thank you, Mr. Levin.
    And we are pleased to welcome our excellent panel of 
experts who have extensive experience running both large and 
small manufacturers. I believe that their experience and 
insight will be helpful as we focus on tax reform as it relates 
to their industry. First, I would like to welcome and introduce 
Ms. Diane Dossin. Ms. Dossin is the chief tax officer and a 
long-time employee of Ford Motor Company. Ms. Dossin, thank you 
for being here today.
    To introduce our second witness I yield to the gentleman 
from Minnesota, Mr. Paulsen.
    Mr. PAULSEN. Thank you, Mr. Chairman, it is my privilege to 
welcome also Mr. Skip Gjersdal, from 3M who is the vice 
president of Tax and Real Estate who we will hear from in just 
a little bit. Skip has worked in the tax department actually at 
3M for over 12 years. He has a strong background in tax, and 
also has worked previously at Cargill, which is also based in 
Minnesota. He brings a strong wealth of knowledge from a 
manufacturing perspective on tax policy, and the impacts that 
U.S. companies have in competing in the global marketplace. He 
was born and raised in my district in the third district in 
Minnesota, and I am proud to welcome him here. He has been a 
good advisor to me from a corporate tax standpoint as well, Mr. 
Chairman.
    Chairman CAMP. Well, thank you very much, Mr. Paulsen. And 
now to introduce our witness from New York, I will yield to Mr. 
Reed.
    Mr. REED. Thank you, Mr. Chairman. It is my pleasure, and I 
am pleased to introduce Susan Ford, the vice president of Tax 
at Corning Incorporated. As you know, Corning Incorporated is 
headquartered my district in Corning, New York. This company 
has been around for 161 years. It is the world's leading 
manufacturer of high technology glass, and glass ceramic 
components. It was founded by Amory Houghton the great-great 
grandfather of former Congressman Amo Houghton who, as you 
know, was a member of the committee for many years and a good 
friend to many of us here on this panel.
    Corning is proud to have invented a number of technologies 
with significant impact on the world, including optical fiber, 
ceramic substrates for catalytic converters, and is the world's 
largest produce of glass for LCD-TVs and a lot of our phones 
and other materials have that material on them.
    So I am proud to be here. I am proud to introduce Ms. Ford, 
and I look forward to her testimony, and I welcome her and 
yield back the balance of my time.
    Chairman CAMP. Well, thank you, Mr. Reed. Our fourth 
witness, Ralph Hardt, the President of Jagemann Stamping 
Company in Manitowoc, Wisconsin. Aside from his work at 
Jagemann, Mr. Hardt brings a wealth of experience from managing 
several other small manufacturing businesses.
    And fifth, we will hear from in Kim Beck, the President and 
CEO of Automatic Feed Company in Toledo, Ohio. Mr. Beck had so 
much good information to share with us that last night after 
his flight from Toledo to Washington was canceled, he hopped in 
his car and made what I imagine must have been close to an 8-
hour drive to Washington, D.C. So Mr. Beck, thank you for your 
commitment and fortitude in making the effort to be with us 
here today.
    Our sixth witness will be Mr. Hugh Spinks. Mr. Spinks is 
the vice president of Tax for Air Liquide USA, located in 
Houston, Texas. Additionally, Mr. Spinks is on the tax 
committee of the American Chemistry Council and serves on the 
board of directors to the Organization for International 
Investment.
    And finally, we will hear from Miss Heather Boushey. Ms. 
Boushey is a senior economist at the Center for American 
Progress here in Washington, D.C.
    Thank you all again for your time today. The committee has 
received each of your written statements. They will be made 
part of the formal hearing record. Each of you will being 
recognized for 5 minutes for your oral remarks and Ms. Dossin, 
we will begin with you. You are recognized for 5 minutes. Thank 
you.

   STATEMENT OF DIANE DOSSIN, CHIEF TAX OFFICER, FORD MOTOR 
                            COMPANY

    Ms. DOSSIN. Thank you. Good morning, Chairman Camp, Ranking 
Member Levin, and Members of the Committee. I am the Chief Tax 
Officer of Ford Motor Company, a manufacturer of cars and 
trucks, headquartered in Dearborn, Michigan. We employ over 
66,000 at 25 manufacturing facilities and other office 
buildings. And we thank you for holding this hearing on tax 
reform in the manufacturing sector, which you all understand is 
the most important sector in the American economy.
    Ford has manufactured cars and trucks for over 100 years, 
but not that long ago, we were fighting for survival. And we 
stood up in that moment and developed a plan to aggressively 
restructure the company. We rationalized our brands. We 
leveraged our global strengths to build high-quality products 
more efficiently. We revised labor contracts. We funded post-
retirement healthcare. We funded pensions. We restructured the 
dealer network. And to fund all of that, we took out what 
everyone described as the largest home-improvement loan that 
was secured by all of the assets of Ford, including the 
trademark blue oval. And over the last couple of years, we have 
repaid over $20 billion of that debt, and the blue oval belongs 
to us again.
    And we did all of that against the backdrop of the severe 
economic conditions at the time, and we did it outside of 
bankruptcy.
    In short, we have restructured every element of the 
business that we could, and we have returned to profitability 
in the U.S., but our tax expense does remain internationally 
uncompetitive. We are grateful that Republicans and Democrats 
have recognized that the U.S. corporate tax rate is simply too 
high. Chairman Camp's discussion draft and the President's 
framework for business tax reform both suggest much lower 
rates.
    We are very hopeful that the time for reforming America's 
uncompetitive corporate Tax Code has arrived, and we believe 
that lowering the corporate tax rate is the single most 
important and efficient and simple way to relieve the burden on 
U.S. companies.
    Ford understands that in the current fiscal climate, it is 
likely impossible to achieve a lower rate without broadening 
the base. We also understand that base-broadening comes with 
costs that must be weighed against the value of the lower rate. 
As an American manufacturer, Ford is interested in several tax 
provisions of broad applicability that do encourage important 
U.S. investment. First, the research credit. Many other 
countries have both a low rate, and incentives for research. 
The U.S. should not put itself at a competitive disadvantage by 
heading too far in the opposite direction.
    Second, depreciation, reasonable cost recovery periods at 
least consistent with expected economic wear or obsolescence 
are critical to support continued U.S. capital investment, and 
third, the domestic manufacturing deduction, which recognize 
the special advantages manufacturing activity provides to the 
U.S. economy.
    We are hopeful that a lower rate and a reformed U.S. 
corporate Tax Code will be a net positive for American 
manufacturers to permit us to continue strong U.S. investment.
    Ford does operate globally, and builds vehicles where its 
customers live. We earn a large part of our income in the U.S. 
Abroad, Ford generally operates in relatively high tax 
countries, and we do not have substantial foreign earnings that 
have been taxed at very low foreign rates, and that only come 
back to the U.S. at a very high U.S. tax cost.
    And for that reason, Ford does not have a particular 
position on how the U.S. taxes foreign earnings. Whatever the 
method, Ford believes it is appropriate for corporate tax 
reform to provide some minimum level of U.S. tax when 
corporations shift income to tax-savings countries.
    We see value in all three anti-base erosion options 
included in Chairman Camp's proposal, and that lawmakers need 
not necessarily choose a single approach to combat tax-base 
erosion. The transition to a reformed code is also important to 
Ford. In particular, we are interested in how transition rules 
will apply to foreign earnings and profits deficits, to foreign 
tax credit carryovers, to foreign taxes that have been paid but 
not yet claimed on tax returns, and to overall domestic losses.
    In summary, for over a century, the United States has been 
Ford's home, and its most important market. Ford wants to 
remain profitable in the U.S., and to pay income tax at a 
reasonable rate, similar to the rates now levied by other 
countries. The stakes for corporate tax reform are high, and 
the consequences of failure are serious. We know it won't be 
easy, and appreciate all the more your willingness to tackle 
this important task. We at Ford stand ready to help you in any 
way we can. On behalf of Ford, thank you for the opportunity to 
testify, and I look forward to answering your questions.
    Chairman CAMP. Thank you very much, Ms. Dossin.
    [The prepared statement of Ms. Dossin follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Chairman CAMP. Mr. Gjersdal, you are recognized for 5 
minutes.

STATEMENT OF HENRY W. GJERSDAL, JR., VICE PRESIDENT OF TAX AND 
                        REAL ESTATE, 3M

    Mr. GJERSDAL. Good morning, Chairman Camp, Ranking Member 
Levin and Members of the Committee.
    Chairman CAMP. You need to push the button on the 
microphone.
    Mr. GJERSDAL. Good morning, Chairman Camp, Ranking Member 
Levin, and Members of the Committee. My name is Skip Gjersdal 
and I am the vice president of Tax and Real Estate at 3M 
Company. I thank the committee today for the opportunity to 
address the important issue of tax reform. As you know, the 
U.S. corporate tax rate is the highest tax rate of any country 
in the world. In some cases, the high U.S. tax rate is 
mitigated by tax credits and deductions. These credits and 
deductions, however, often fail to adequately encourage the 
behavior they are intended to incentivize, and create 
competitive imbalances between U.S. companies. In addition, the 
Internal Revenue Code has not kept up with the rapidly changing 
international business environment.
    Virtually, every developed country has responded to these 
changes by adopting tax systems that provide their domestic 
corporations the tools to compete in the global marketplace. 
Also, part of this new global reality is that nearly 50 percent 
of the world's public companies, and frankly many of our 
competitors, are now based outside the U.S. in Western Europe. 
They start with the competitive advantage in the marketplace 
because of the lower tax rates they enjoy.
    3M submits that the U.S. could take a few key steps to 
address these competitive imbalances while simultaneously 
creating greater simplicity and predictability for its domestic 
corporations. First and foremost, we recommend that the 
corporate tax rate be reduced. We support the chairman's 
proposal to reduce the rate to 25 percent, a rate which is more 
in line with other developed countries that view a lower 
corporate tax rate as a competitive advantage.
    We recognize that a large reduction of the corporate tax 
rate would require substantial offsets from existing deductions 
and credits. For example, 3M utilizes the Section 199 
manufacturer's deduction, accelerated and bonus depreciation, 
and the R&D credit.
    The manufacturer's deduction, provides a significant 
benefit to our company, since 3M has half of its manufacturing 
base in the United States. However, lowering the rate to 25 
percent would offset the benefit of this deduction, and would 
also eliminate the complex and time-consuming record 
requirements required by the Section 199.
    3M would also support the repeal of accelerated and bonus 
depreciation to partially pay for a significantly lower tax 
rate. While depreciation provisions provide a significant 
benefit to the company, these rules merely change the timing 
deductions and result in an upfront cash flow benefit. 
Importantly, they do not impact the tax rate reported by the 
company in its financial statements.
    Finally, 3M would also forego the current R&D credit for a 
significantly lower rate. As one of the most innovating 
companies in the world, 3M believes that intellectual property 
development must remain a cornerstone of American business. 3M 
spends over $1.6 billion a year on R&D. However, today's R&D 
credit provides insufficient incentives to encourage R&D 
investment in the U.S. because it is based on incremental 
spending on a limited portion of R&D expenditures. And of 
course, its temporary nature limits its effectiveness. If 
Congress wishes to continue to encourage R&D here in the United 
States, there are numerous ways to substantially improve the 
incentives for research development and the ownership of 
intellectual property.
    For example, a so-called patent box could provide a low 
rate of tax on income generated from intellectual property 
developed and owned in the United States. This would not only 
encourage investment in IP, but it would also encourage its 
retention in the U.S.
    Lastly, 3M applauds the chairman's inclusion of a 
territoriality system in his proposal. We agree with the 95 
percent exemption system rather than the alternative systems 
that would create unnecessary complexity. The territorial 
system would bring the U.S. in line with most developed 
countries, including the U.K., Canada, Germany and Japan. In 
addition, such a change would facilitate a partial or full 
repeal of many international tax rules, which are amongst the 
most complex and controversial rules in the Code. Replacing 
those rules with the territorial system would greatly enhance 
simplification and transparency.
    Again, we thank the committee for inviting 3M to speak 
today. We support its efforts to achieve comprehensive reform 
with a substantially lower rate and territoriality, field a 
simpler and more transparent Code, and to help American 
companies compete in a global economy.
    Chairman CAMP. Well, thank you, Mr. Gjersdal.
    [The prepared statement of Gjersdal follows:]


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    Chairman CAMP. Ms. Ford, you are recognized for 5 minutes.

STATEMENT OF SUSAN L. FORD, VICE PRESIDENT OF TAX, CORNING INC.

    Ms. FORD. Good morning, Chairman Camp, Ranking Member Levin 
and Members of the Committee. My name is Susan Ford and I am 
the vice president of Tax for Corning Incorporated. We are a 
glass technology and research company located in Upstate New 
York. Mr. Reed gave a great background for Corning, so I won't 
cover most of that, but I do want to hit a couple of points to 
give us context for our discussion.
    Corning does have approximately $7.8 billion in sales as of 
2011, and we have 29,000 employees worldwide, of which more 
than half of that payroll is located in the United States. 
Corning takes a tremendous amount of pride in its heritage as 
one of America's oldest and most innovative companies, the 
company that has been said to recreate itself. Corning spends 
about 10 percent of our global revenues in R&D, about 98 
percent of which is conducted within the United States, and 
mostly in Upstate New York. We have manufacturing in 11 of the 
26 States in which we operate in this country.
    Corning is also a global company, however, approximately 79 
percent of our sales are to foreign customers. Corning operates 
in many industries where the customers and competitors are 
predominantly or entirely located outside of the United States. 
To survive and prosper, Corning must operate there as well. I 
will give you an example in our display business. Display is 
our largest segment at Corning and it is segment that makes the 
LCD glass in the televisions. The glass that we actually make 
is formed in sheets that are about the size of a king-size bed 
and about the width of four times the human hair. So you can 
imagine that shipping that kind of glass, nothing good happens 
when you ship it thousands of miles.
    For that reason, we often located our manufacturing 
facilities in the same, obviously on the same--frequently, 
excuse me, on the same piece of land as our customers. Because 
foreign markets are a larger proportion of the global consumer 
demand, we must be able to grow both not just domestically, but 
internationally. This is true for Corning and many other U.S. 
manufacturers working to compete in an intense global market. 
We need tax policy that is competitive while continuing to 
incentivize innovation and job creation in the United States. 
The current Tax Codes, manufacturing and R&D incentives, tax 
rates, and worldwide system taxation are complex and simply no 
longer globally competitive in our view.
    I will give you a brief example for Corning. Our U.S. 
effective tax rate in 2011 was approximately 36, 37 percent. 
And our foreign rate was approximately 17 percent. This was 
principally due to the fact that some of the foreign 
jurisdictions in which we operate provided significant 
incentives for capital investment. Again, these are business 
decisions that were made to be close to our customers because 
our product is difficult to ship, but additionally, it receives 
some incentives that allowed us to earn income at some lower 
foreign rates, particularly in Asia. It is very common in Asia. 
For this reason we are very heartened by the growing consensus 
among U.S. policymakers in general for the need to reform the 
U.S. Tax Code.
    Some of the points, I will make are a bit repetitive to the 
prior two witnesses, but I think they are important enough to 
have another mention. Two principal points. I think the lower 
rate is very key. The lower rate will allow for a couple of 
things. One is its universal applicability, right. It will help 
domestic manufacturers. It will help companies that export from 
the U.S. It will help companies who are competing with foreign 
importers, for example. And secondarily, I think that the lower 
the rate can go, the less likely companies are incented to move 
income offshore.
    The second part of Mr. Camp's proposal that I think is a 
principle that improves competitiveness is the territorial 
system. This is particularly important to multinationals like 
Corning who are based in the U.S., have significant employment 
in the U.S., but must compete with foreign companies abroad in 
their home countries.
    We believe the territorial system--the nonterritorial 
system currently is a disadvantage to U.S. companies because it 
costs more for us to repatriate trade income, versus our 
competitors.
    We do acknowledge that moving to a territorial system 
presents some transition challenges and we acknowledge Mr. 
Camp's proposal of a foreign earnings inclusion as an 
appropriate response to that. We appreciate the reduced rate on 
those earnings because companies like Corning often have 
earnings abroad that are in capital and in buildings and 
infrastructure that can't be returned. This presents a 
particular hardship for companies like Corning when tax is on 
all of the income but the cash cannot be returned to pay those 
taxes.
    I think as a final point, it is important to note that base 
erosion principles, I agree with Ford in the sense there are 
three of them there and a balance can be used. We do believe 
that option C encourages companies to keep their innovation 
here in the United States, and their IP here in the United 
States because it does tax that income at a lower rate. It 
allows us to be more competitive with other companies, again, 
who have these intangibles offshore, and pay lower rates on 
their royalty income.
    As patent laws around the world become more sophisticated 
and the enforceability improves, historic benefits of having 
U.S. technology ownership just no longer serve as sufficient 
compensation for a higher U.S. tax burden on the related 
income.
    In summary, we do believe tax reform is a necessary action 
for the competitiveness and economic health of the United 
States and the manufacturers in it. For U.S. headquartered 
companies competing at home or abroad, the current system is 
cumbersome and inefficient. Many developed nations have 
modified their policies to facilitate competition and encourage 
domestic investment. The United States should not allow its 
trading partners to gain an advantage through tax policy 
modernization. Moving to a competitive territorial system with 
a competitive tax rate will result in benefits both to the 
United States and its manufacturers. Thank you, very much for 
the opportunity to participate today.
    Chairman CAMP. Thank you, Ms. Ford.
    [The prepared statement of Ms. Ford follows:]


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    Chairman CAMP. Mr. Hardt, you are recognized for 5 minutes.

   STATEMENT OF RALPH E. HARDT, PRESIDENT, JAGEMANN STAMPING 
                            COMPANY

    Mr. HARDT. Good morning, Chairman Camp, Ranking Member 
Levin, and all committee members. Thank you for the opportunity 
to testify before you today on an issue that impacts 
manufacturers of all sizes, especially small businesses like 
ours.
    I am Ralph Hardt, President of Jagemann Stamping based in 
Manitowoc, Wisconsin. Chairman Camp got it pretty close in your 
introduction, thank you.
    Chairman CAMP. All right.
    Mr. HARDT. It is a family-owned business, with 300 
employees, where we manufacture precision metal parts and 
export 22 percent of our products over 15 different countries. 
We have a subsidiary in Nashville, Tennessee with 33 personnel 
as well. I am also chairman and owner of another small 
manufacturing company in South Carolina, with 31 employees in 
precision grinding and finishing. My involvement with these 
three small businesses located in very different parts of the 
country, gives me an excellent understanding of how to compete 
globally and grow investments in our equipment and our 
employees. We are also members of the Precision Metal Forming 
Association, and National Tooling Machines Association, which 
together have about 3,000 companies averaging 50 employees per 
business. Most are family owned and about 2/3s of these 
companies are structured as Subchapter S corps with some more 
pass-throughs. How our businesses are organized and the way we 
pay taxes has the single greatest impact on our companies, and 
how much we can reinvest in our businesses.
    For example, one of our members, a New England based 
manufacturer with roughly 200 employees will see a 6 percent 
effective tax rate increase this year compared to 2011, 
assuming no congressional action will take place, and could 
jump as much as 15 percent.
    With so much uncertainty over upcoming tax increases and 
changes, small companies and small manufacturers like us are 
becoming very conservative right now, are frozen in place and 
possibly not making significant investment in our business. 
This is a very important point. The uncertainty in a Tax Code 
and what the future holds keeps many manufacturers from 
investing as much as they should or could to grow their 
business, purchase new equipment, and hire new employees.
    In fact, even the Federal Reserve chairman when testifying 
recently before Congress, said, ``The global and other 
uncertainties are slowing the demand for capital investment.'' 
This is simply the wrong thing needed for our country right 
now.
    In order for manufacturing to succeed in this country, we 
need stability and transparency in our Tax Code. In our 
industry, we often have to investment millions of dollars 
annually into new equipment, research and training for our 
employees to remain globally competitive. We therefore fully 
support expanded bonus depreciation, Section 179, domestic 
production activity deductions as tools manufacturers use to 
create jobs and compete globally.
    For example, our precision grinding company in South 
Carolina with barely 30 employees just bought a new machine for 
$270,000, that require three additional new employees to 
operate; a 10 percent increase in our workforce.
    What many policymakers in Washington do not understand, is 
unlike larger corporations, small manufacturers like us are 
required to provide a personal guarantee for most loans when 
purchasing capital equipment, or expanding our facilities. I 
just recently signed a personal guarantee for the new $270,000 
grinder I just mentioned. This means as a small business owner, 
I have to put even my family's home on the line and take 
significant risk if I want to grow my business and compete 
globally.
    In Wisconsin, our investment over the years come up to 
147,000 per employee and we spent over half a million in 
research and development. There is a lot of noise in Washington 
right now about only raising taxes on wealthy to pay for 
government programs and hopefully balance our federal budget. 
However, small businesses, we may report 250,000 or more in 
profit, but few manufacturers actually take those profits home. 
They will overwhelmingly reinvest it in the business and our 
employees manufacturing in America. Based upon an industry 
survey, most small manufacturing business owners pay a combined 
tax rate of 36 percent, distribute 18 percent; however, 
reinvestment between 46 and 50 percent back into the business.
    Tax increases also result in reduced cash flow potential, 
further limiting access to capital which is already difficult 
enough for small business lenders to secure. Lenders and other 
investors in a new business look at the tax implications as 
closely as we do whether deciding, or not, to funding 
manufacturing investments.
    We, again, need a reformed tax structure in this country, 
which encouraging Americans to start, and I emphasize this is 
important, to be compelled to start or expand any manufacturing 
businesses here and hire new employees here in the U.S. 
Comprehensive tax reform to us means fixing the problem for 
both traditional C corps and S corp pass-throughs at the same 
time; the vast majority which are family-owned.
    With over 70 percent of all U.S. manufacturers structured 
as pass-throughs, companies like ours contributing the 
overwhelming economic activity in the sector which accounts for 
a substantial portion of our GDP.
    However, small manufacturers are ready to step up to the 
plate on tax reform, and will forego some tax credits and 
deductions if it means a lower effective rate for all 
manufacturers in solving our Nation's budget crisis. However, 
we cannot afford to fix the problems on the backs of family-
owned businesses and only address larger corporations or 
multinationals without remembering that again, 70 percent of us 
in manufacturing are structured this way.
    I strongly urge politicians to move beyond labels, rich 
versus poor, employer versus employee. No manufacturing company 
can succeed without strongly investing in their employees and 
equipment. Tax reform needs to happen for everyone.
    On behalf of Jagemann Stamping, Jagemann Precision 
Plastics, Labtech Industries, and all of our employee 
associates, I thank you very much for the opportunity to 
testify before you today, and I look forward to answering any 
questions you may have.
    Chairman CAMP. Thank you very much, Mr. Hardt.
    [The prepared statement of Mr. Hardt follows:]


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    Chairman CAMP. Mr. Beck, you are recognized for 5 minutes.

   STATEMENT OF KIM BECK, PRESIDENT AND CEO, AUTOMATIC FEED 
    COMPANY, ON BEHALF OF THE ASSOCIATION FOR MANUFACTURING 
                           TECHNOLOGY

    Mr. BECK. Thank you, Chairman Camp, and Mr. Levin, and 
Members of the Committee for holding this hearing today and 
giving me an opportunity to participate. I am here representing 
small manufacturers, even smaller than Mr. Hardt's here, on 
behalf of AMT, The Association For Manufacturing Technology, a 
trade association made up of 600 manufacturers across the 
United States, most of them with sales of less than $10 
million.
    I am here to convey to you the toll the great recession has 
had on this Nation's small business, particularly small 
manufacturers like Automatic Feed Company, and I want to tell 
you that small business owners have great concerns about the 
words and actions coming out of the Federal Government. This 
year marks 63 years of continuous operation of Automatic Feed 
Company in Napoleon, Ohio. We were devastated by the recession. 
We almost didn't survive. In just 12 months, our revenues 
dropped by 90 percent. Our sales went from $30 million down to 
$4 million. Prior to the recession, we had 110 employees. They 
were highly-skilled engineers, welders, machinists, and machine 
assemblers. 48 of them were skilled union employees. Over the 
next 2 years, our workforce dwindled to 25. Wages were cut an 
average of 40% while the top management took 60 percent pay 
cuts that still haven't been restored.
    I have spent the last 4 years trying to save our company. 
We survived only because we made the necessary sacrifices, and 
we had very little debt. The banks were under such scrutiny 
that they were not lending, especially to small manufacturers 
tied to the automobile industry.
    Today, small manufacturers are angry that after they made 
such great sacrifices, they are now being asked once again to 
finance a government that is too large, too inefficient and 
fiscally irresponsible. The rhetoric out of Washington against 
small businesses is getting louder every day. Why would the 
government punish small manufacturers with higher taxes and 
other imposed cost burdens when we are the ones creating jobs? 
It is illogical and unfair. Often it seems as though the 
largest impediment to our growth is our U.S. Government. Higher 
taxes, more regulations, increased health care, and energy 
costs, outdated policies, and a complicated broken Tax Code all 
contribute to a significant competitive disadvantage American 
manufacturers face when compared to foreign counterparts.
    In 1975 when I came into this business as a young man out 
of college, U.S. manufacturing and machine tools were number 
one in the world. Today, we are number seven behind China, 
Japan, Germany, Italy, Korea, and Taiwan. Automatic Feed 
Company has no U.S. competition. Our competition comes from 
companies that are 100 times larger than we are. They are 
German, Korean, Japanese, Spanish, and Chinese. For us to 
consistently outpace our competition, we need to have a lower 
cost structure. Part of that lower cost structure has to be 
lower regulations, lower taxes, and support that helps us 
compete worldwide.
    One of the biggest obstacles is our own Tax Code. Today, 
the United States now has the highest corporate tax rate in the 
industrialized world. It significantly contributes to an 
unlevel playing field for American manufacturers. Bad tax 
policy is not only anticompetitive, but it also leads to less 
tax receipts collected by the Federal Government. Bad tax 
policy outsources jobs.
    The President proposed letting the Bush tax cuts expire for 
those making over $250,000 a year. When are our elected leaders 
going to realize that a tax increase on those who report higher 
incomes is a direct tax increase on manufacturers like me. 
Partnerships, LLCs, sole proprietorships, and Subchapter S 
corporations are a significant share of those that are 
considered ``wealthy'' under this tax law, because we file 
individual income taxes. When in actuality, none of us bring $1 
million into our own homes each year. We take that money that 
we make and we reinvest it into salaries for our people, for 
R&D, and for modernizing our plants and facilities.
    The 3 or 4 percent tax increase means a lot to small 
manufacturers that were starved of profits during the last 
recession. Today, we could use that money for reinvestment and 
help rebuild this economy.
    One hundred percent bonus depreciation, increased Section 
179, expensing levels, and the R&D tax credit should be 
extended now. The R&D tax credit has helped us in developing a 
new product line that we have been working on for 5 years. We 
haven't made a cent on it yet. It hasn't hit the market, but 
without the credit, we would not even have tried. In the long 
term, we need to tackle tax reform across the board. We need to 
increase the cash flow to our companies through investment, and 
also free up more days of operation for covering our processes.
    And also, we need to keep our current estate tax rates. I 
want to thank you for this opportunity and I urge you to take 
the action necessary to help strengthen small businesses and 
small manufacturers.
    Chairman CAMP. Thank you, Mr. Beck.
    [The prepared statement of Mr. Beck follows:]


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    Chairman CAMP. Mr. Spinks, you are recognized for 5 
minutes.

 STATEMENT OF HUGH SPINKS, VICE PRESIDENT OF TAX, AIR LIQUIDE 
                           USA, INC.

    Mr. SPINKS. Mr. Chairman, and Members of the Committee, I 
appreciate the opportunity to testify today on the issue of 
corporate tax reform to produce a more simple, predictable, and 
competitive tax environment in the U.S.
    My name is Hugh Spinks and I appear today on behalf of Air 
Liquide USA, one of the Nation's leading industrial and medical 
gas companies. Air Liquide is the world leader in industrial 
medical gases. We operate in 80 countries around the world, 
employing over 46,000 world citizens. Headquartered in Houston, 
Texas, Air Liquide USA, has over 5,000 American employees, in 
more than 200 locations throughout the country, and actually a 
physical presence in all 50 States. For decades, Air Liquide 
has offered industrial and medical gases and related services 
to the Nation's largest industries, including manufacturing, 
electronic, and health care. Air Liquide is focused on 
technological innovation to help make our Nation's 
manufacturing and industrial sectors more efficient, 
environmentally friendly, and productive.
    The industrial gases business is an essential and thriving 
cornerstone of American manufacturing and technology, reaching 
into every conceivable sector of the economy. Air Liquide, is 
committed to significant growth and domestic expansion, and in 
fact, has doubled its investment in the United States during 
the last 5 years.
    This investment has created new jobs, and access to 
critical products and technologies in communities throughout 
the Nation; from Texas to North Dakota, from California, to 
Delaware.
    We see the future for U.S. manufacturing as bright, and 
rich with opportunities, but we are also pragmatists in the 
distribution of our resources. In deciding where Air Liquide 
will make its investments, we examine all of the potential 
costs, including taxes. With such a large and capital-intensive 
operation, we oftentimes have more potential projects than 
capital on a worldwide basis, forcing difficult decisions about 
where to allocate scarce resources. Corporate tax reform should 
be designed in a manner that encourages global companies like 
Air Liquide to make increased capital investment in the United 
States.
    This requires, among other things, a level-playing field, 
one that is not punitive or discriminatory based upon where a 
company is headquartered.
    Over the last couple of decades, many countries have 
significantly lowered their corporate tax rates to attract new 
business investment and create jobs. For example, U.S. 
competitors in such diverse geographies as Canada, the United 
Kingdom, and recently Japan, have significantly lowered 
corporate tax rates and passed legislation to simplify their 
taxation of business.
    With Japan's 2012 corporate rate cut, the Federal plus 
State income tax rate of about 39 percent in the U.S. is the 
highest in the OECD. This puts the U.S. in a position of trying 
to compete for new investment projects with countries whose 
corporate tax rates are often 7 to 10 percentage points lower.
    In spite of the many advantages that the U.S. offers as a 
premier location to do business, trying to achieve an 
equivalent after-tax return on investment under these 
circumstances is challenging. With a lower corporate tax rate 
of 25 percent as suggested by Chairman Camp, the U.S. would be 
better able to compete for new projects.
    As an internationally headquartered company, Air Liquide is 
part of the dynamic business community of global companies that 
play a critical role in the health of the U.S. economy, 
particularly in the manufacturing sector. The U.S. subsidiaries 
of global companies employ over 5 million American workers 
directly nationwide, including 2 million in the manufacturing 
industry. These companies produce 21 percent of total U.S. 
exports, conduct 14 percent of domestic research and 
development spending, and account for 17 percent of U.S. 
corporate income tax payments.
    I applaud the committee's recognition of the important link 
between tax reform and inbound business investment. To 
conclude, we support comprehensive tax reform, and we 
understand there will be trade-offs in the pursuit of a lower 
rate as well as greater certainty and simplicity in the Tax 
Code. I thank the committee for inviting me to testify, and I 
will be pleased to answer any questions that you have.
    Chairman CAMP. Well, thank you, Mr. Spinks.
    [The prepared statement of Mr. Spinks follows:]


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    Chairman CAMP. Ms. Boushey, you are recognized for 5 
minutes.

 STATEMENT OF HEATHER BOUSHEY, PH.D., SENIOR ECONOMIST, CENTER 
                     FOR AMERICAN PROGRESS

    Ms. BOUSHEY. Thank you, Chairman Camp, and Ranking Member 
Levin and Members of the Committee for inviting me here to 
testify on the effects of tax policy on the U.S. manufacturing 
sector. My name is Heather Boushey, I am a Senior Economist at 
the Center for American Progress Action Fund.
    I want to make two points in my remarks this morning, which 
I expand upon in my written testimony, which I have submitted 
for the record. First, manufacturing is not only a key part of 
our economy, but moving forward, it will remain critical to our 
Nation's economic vitality. Economic research is increasingly 
showing that manufacturing is critical to our future. A strong 
manufacturing industry supports solid middle-class jobs, it 
enables our Nation to be a leader in technology and innovation, 
and can help us address our trade deficit.
    Second, there are a variety of ways that policymakers can 
support manufacturing, of which reforming the corporate Tax 
Code, is one piece of the puzzle. The research is clear, that 
any set of policies aimed at supporting U.S. manufacturing 
should include investments in education and training, 
infrastructure, basic and applied research and development, and 
improvements to basic data collection. In terms of tax policy 
to support manufacturing, I recommend that this Congress focus 
on a few key items.
    First, pass comprehensive business tax reform that both 
eliminates loopholes and inefficient business tax expenditures 
without disadvantaging domestic manufacturing. Currently, 
loopholes allow companies to avoid paying U.S. taxes by 
artificially shifting their profits offshore. Closing these 
loopholes, by adopting strong provisions to prevent base 
erosion that will promote job growth in the United States and 
ensure businesses are both competitive and fairly taxed.
    Along these lines, we need to introduce a minimum tax on 
foreign earnings to prevent production from going to tax 
savings overseas, as the President has proposed. This would 
also ease the Tax Code's current bias towards foreign as 
opposed to domestic investment, and to level the playing field 
among competing businesses.
    We also need to find a fiscally responsible way to make the 
research and experimentation tax credit permanent in other to 
boost and attract domestic private investment in R&D. Studies 
have shown that the R&D tax credit stimulates as much research 
and development investment as a direct subsidy, and that the 
social returns on R&D are greater than returns for private 
investors who finance R&D.
    I want to stress that the level of taxation is only one 
piece of the puzzle and the statutory corporate rate is only 
one aspect of the corporate Tax Code and how it affects 
businesses as we have heard already this morning.
    But I also urge you to keep in mind the reason that we tax. 
Tax revenues fund public goods that U.S. manufacturing and 
global corporations that manufacture in the United States 
benefit from and which otherwise would not exist.
    For that reason, when considering levels of taxation, it is 
equally important to weigh the benefits of the public goods and 
services made possible with taxpayer dollars. When it comes to 
creating good manufacturing jobs in the United States, 
government spending plays a critical role in setting the stage 
for economic growth. To promote manufacturing and innovation in 
the United States, or at least to not disadvantage it relative 
to other industries, we recommend improving infrastructure so 
that U.S. goods can be more easily transported and marketed at 
home and abroad. This should include addressing our aging and 
overwhelmed electrical grid as we have all learned about here 
in the District of Columbia over the past few weeks; 
implementing the Obama administration's proposal to start an $8 
billion community-college-to-career fund to encourage 
collaboration and partnerships between community colleges and 
businesses in training our future workforce.
    Two million workers would learn skills vital to working in 
burgeoning industries like advanced manufacturing and health 
care. A highly skilled workforce would also give the U.S. and 
its regional economies further advantages over its global 
competitors.
    In addition, we should increase government investment in 
advanced manufacturing and establish a national network for 
manufacturing innovation. Having a strong manufacturing 
industry in the United States should be at the top of our 
national economic agenda. We will not be a global leader for 
long without a vibrant and innovative manufacturing base.
    The industrial commons matters for innovation and the 
extent to which we allow manufacturing processes to continue to 
go overseas, we only make it that much harder to regain our 
place as a global leader.
    Moreover, as more of our energy future will rely on high-
tech manufacturing, our economic competitiveness, and in fact, 
our future trade deficits will be even more closely aligned 
with our ability to be an innovator and producer of 
manufacturing goods, especially in the energy sector.
    I want to thank you for inviting me here to testify and I 
would be happy to take any questions.
    [The prepared statement of Ms. Boushey follows:]


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    Chairman CAMP. Well, thank you, Ms. Boushey. Thank you all 
for your testimony. I do have a question for Ms. Dossin, Mr. 
Gjersdal, and Ms. Ford.
    Several witnesses at the table as manufacturers have 
testified that lowering the statutory rate is so critical to 
America's ability to compete, that it is worth giving up 
substantial deductions and credits. And some have also talked 
about the importance of encouraging domestic innovation, moving 
to a territorial system with anti-abuse rules.
    Now, would a 25 percent rate, a territorial system with 
reasonable safeguards to prevent shifting to low tax havens and 
adequate incentives to conduct R&D, and locate intellectual 
property in the U.S. be attractive enough to you, that even as 
manufacturers who benefit from numerous deductions and credits, 
you would be willing to put all of your tax preferences on the 
table? And why don't I start with Ms. Dossin.
    Ms. DOSSIN. Sure. I think the very fact that you have 
called this hearing means that you recognize those provisions 
do have power in the economy, and I don't think it is time 
quite yet to choose which ones stay, and which ones go, but I 
am here to say that when that time does come, they will be all 
on the table, and we will want to be at that table helping 
choose what helps the U.S. economy go forward.
    And for Ford's business to go forward in the U.S., I will 
say again, we think the low rate is the single-most important 
thing, and beyond that, we would look for more stability, 
simplicity, so that whatever is in there is something that I 
can communicate to management to help decision-making and 
hopefully that would support decision-making that keeps 
investment in this country.
    Chairman CAMP. All right, thank you. Mr. Gjersdal.
    Mr. GJERSDAL. We would certainly be willing to put every 
preference on the line. There is no question that a lower tax 
rate not only would be evening the playing field for all 
companies here in the U.S., the other thing it would do is, it 
would really simplify things and create transparency. Right 
now, the Tax Code simply is not believable, and that is not 
only to the public at large, that is to the executives at 3M. I 
find it almost impossible to explain the Tax Code to them these 
days. They don't believe me it is so complicated. So frankly 
going to a lower rate----
    Chairman CAMP. I am familiar with that problem.
    Mr. GJERSDAL. It is a very difficult proposition. But 
frankly, putting all of the preferences on the line for a lower 
tax rate is definitely the way to go.
    Chairman CAMP. All right. Thank you, Ms. Ford.
    Ms. FORD. I would echo the comments made. I think 
everything should be considered, particularly when you start to 
get towards the 25 percent rate. It does make us more 
competitive. I think the overriding concern, of course, is that 
rates can have a very easy tendency to creep back up. So I 
think it is really important that we think through the other 
provisions that we remove is they are incentivizing particular 
behaviors, and then avoid a subsequent kind of rate creep up 
over time.
    Chairman CAMP. Thank you. I have a question for Mr. Hardt 
and Mr. Beck. Earlier this week Ernst & Young released a report 
that analyzed what would happen if we would adopt the 
administration's proposal to let taxes on small businesses go 
up at the end of the year. Roughly, it is the $200,000 for 
individuals, $250,000 for couples. And among other conclusions, 
the report finds if that were enacted, that it would destroy 
over 700,000 jobs and that wages would fall by 2 percent. Now, 
I would just ask both of our small manufacturers, how would 
this proposal affect your businesses specifically?
    Mr. HARDT. Thank you for the question. As I mentioned 
earlier, approximately 70 percent of the manufacturers in the 
United States are structured as S corps, or pass-through 
entities. And there is only so much of the pie. You have taxes 
to pay out of the pie, reinvestment in your business, which is 
by far the overwhelming portion where our profits goes. I just 
mentioned that yesterday we were installing a $270,000 grinder, 
which is in excess of the $250,000 you just mentioned, which 
comes out of profits of the business. And of course, to repay 
borrowings to our banks. And again, they are wanting more 
profits in the business as well to justify borrowings these 
days. Borrowing money has been a little tougher the last couple 
years.
    So to me, it would directly impact investment, if you 
switch up the pie, shall we say, and it would be negative for 
us. The real issue we have today is uncertainty. I need to 
mention that again, that we are making decisions, borrowing 
money, personally guaranteeing loans, hiring people, and the 
uncertainty with that proposal also is very concerning to us.
    Chairman CAMP. All right. Mr. Beck.
    Mr. BECK. I agree with Mr. Hardt. When you take a look at a 
company like ours, basically my brother and I own the company. 
If the company makes $1 million, that means as a subchapter S 
company, I pay--would pay the taxes on half of that, $500,000, 
and my brother would pay the other half. The money comes from 
the company, but we are not taking that as revenue into our own 
pockets. That money that we make has to be reinvested in the 
business.
    If you take 3 or 4 percent more intakes, we have already 
gone through a great recession. We have been starved for 
profits. We are hoping to make some profits this year. We would 
like to hold onto whatever we can, and not have to give it back 
as taxes. We need to reinvest in training our people, because 
now we have had to hire back a lot of people. We haven't put 
investment back in our company because we haven't been able to. 
We would like to do what Mr. Hardt is doing and upgrade our 
machinery. And 3 or 4 percent to a small company like ours I 
think has a lot more impact than the revenue that you are going 
to be generating for the Federal Government.
    Chairman CAMP. All right. Thank you. Mr. Levin is 
recognized for 5 minutes.
    Mr. LEVIN.Well, I think if we can, we should resist using 
this hearing to have an overall discussion of the very basic 
disagreement as to the high income tax cuts. I am not sure of 
the situation for the two of you, but Joint Tax has told us 
that only 3 percent of small businesses have income over 
$250,000 a year. So the Ernst & Young report is deeply flawed 
in terms of its methodology, assuming that none of the tax cut, 
the end of the tax cut for high income would go for deficit 
reduction. It has other deep flaws. But if we spend our time 
today arguing over this, I think it will be a mistake.
    I thought the focus was the importance of manufacturing. 
And what has happened in these last years is there has been a 
resurgence in understanding of the importance of manufacturing 
in this country. The language became that we were in a post-
industrial era. And it turns out, as shown by what has happened 
in the last couple of years, that manufacturing remains a very 
key part of our economy. And it has helped to lead us back from 
the pit, and helped to create jobs. And the difference of 
opinion about that was crystallized in our reaction to whether 
we would let a couple of the domestic auto companies go under 
and not be able to come back.
    So I would hope we could have a focus today on the 
importance of manufacturing, and how our Tax Code relates to 
it, and how we approach tax reform, keeping in mind the 
importance of manufacturing. And I think this panel illustrates 
the challenge for us to do that. And to simply say let's have a 
goal or a policy of reducing to a certain level, without taking 
into account what would be the impact on manufacturing, I think 
is misguided.
    There are differences of opinion among all of you as to 
what would be the impact of the focus only on the rate, without 
determining its impact on manufacturing. And I understand that 
difference of opinion. Your companies are in different 
positions. To say that everything should be on the table, that 
is, I think, okay, provided you keep in mind the objective of 
what you look at when everything is on the table. And I think 
the testimony, if I might say so, on manufacturing by the two 
of you illustrates that. And so Mr. Hardt, without discussing 
larger issues of taxation and upper income taxation, I think it 
is revealing when you say on page--our pages I guess aren't 
numbered--but you do refer to it, and I think it was important. 
You said we fully support expanded bonus depreciation, Section 
179 expensing, and Section 199, domestic production activity 
deduction as tools manufacturers use to create jobs and compete 
globally.
    And I think it is important to remember that, because if 
you eliminate those, you don't get down to 25 percent eliminate 
everything. And the question becomes, what happens to these 
incentives for manufacturing? Should we have them? And then Mr. 
Beck, you say I think very compellingly on page three, ``Bonus 
depreciation and increased 179 expensing can be deciding 
factors for businesses considering equipment upgrades or 
company expansions. These two incentives most assuredly 
contributed to the impressive growth in manufacturing 
technology orders in 2011.''
    And then you go on to say, ``There is no question,'' on 
page 4, ``R&D leads to new technologies and innovation.'' And 
you conclude on page 4, ``Without the credit, we may not have 
made the investment.'' So I think that illustrates how we need 
to approach this, not with a simple mantra, but with a 
question, is manufacturing and the Tax Code supporting that an 
important criterion in terms of tax reform? And I think the 
answer clearly has to be yes, it is a major priority.
    Chairman CAMP. Thank you. Time has expired. Mr. Johnson is 
recognized for 5 minutes.
    Mr. JOHNSON. Thank you, Mr. Chairman. Mr. Hardt, you know, 
it is a testimony to the great entrepreneurial spirit that has 
helped make this country as great as it is. It is too bad the 
President and others are attacking this spirit. I am sure you 
heard by now President Obama say, ``If you got a business, you 
didn't build that. Somebody else made that happen.'' Mr. Hardt, 
did somebody else build your business?
    Mr. HARDT. It was a team effort with myself, my partner, 
and a lot of our employees, but we took the risk, that is a 
fact, and continue to.
    Mr. JOHNSON. And government didn't build your business 
either, did it?
    Mr. HARDT. Government can assist. Government can assist 
with certain incentives to help invest in what we do, to make 
sure we are globally competitive. But we took the majority of 
the risk, that is a fact.
    Mr. JOHNSON. You bet. Mr. Hardt, with respect to tax 
reform, would you be willing to put all the various deductions 
and credits on the table for a top rate of 25 percent?
    Mr. HARDT. It is a little bit difficult for me to answer 
that, to be honest with you. The reason I say that is I do 
believe that in small manufacturers like ourselves, cash flow 
is a key priority to what we do. And that some of the 
incentives to recognize investing in the U.S., to spending 
capital, to taking risks, for encouraging people to get into 
the business, such as e, mentioned, the depreciation 
deductions, are beneficial. However, saying such, looking at 
the total effective tax rate, and looking at lowering the total 
effective tax rate to allow us to put more into our business is 
very critical, and would be very welcome. And I am sure both of 
us, two small guys here, would do that.
    Mr. JOHNSON. That is close. So tell me, what key three 
points would you like to leave with us when it comes to tax 
reform?
    Mr. HARDT. First of all, that manufacturing is very 
important to our economy. And we do need to look at 
manufacturers, both large and small, C Corps and pass-throughs, 
as being very vital to our economy. And I need to support my 
brethren to my right here, the larger companies, because they 
are my customers, and so they need to remain competitive too. 
And we need to make sure that we make all manufacturers 
competitive.
    Secondly, I encourage us to continue to look to 
incentivizing people to get into business, to start businesses, 
to build businesses that are vibrant to the backbone of the 
country and to feel confident that they can take the risk, and 
they know with some certainty what is going to happen if they 
take the risk. I need to mention again, uncertainty is very 
difficult when running a small business or a family business. 
So those are really my two key points that I need to leave you 
with.
    Mr. JOHNSON. Thank you. Mr. Gjersdal, as you may know, 
earlier this year the administration released its framework for 
business tax reform, which calls for a minimum tax on foreign 
earnings. What are your thoughts about that proposal?
    Mr. GJERSDAL. Well, that is a difficult question to answer 
because, first of all, we don't know what that rate might be. 
Secondly, we don't know how the foreign tax credit mechanism 
may work with it. At a high level, though, it concerns me. 
First of all, it just suggests to me that this will increase 
complexity, not decrease complexity. And furthermore, I don't 
see it really helping us compete in the global marketplace. I 
still believe territoriality is a much better answer.
    Mr. JOHNSON. So you more or less think that we need to have 
a less complex system?
    Mr. GJERSDAL. Simplicity, simplicity, simplicity.
    Mr. JOHNSON. Okay. And such a proposal that we are hearing 
could cost jobs in America, could it not?
    Mr. GJERSDAL. Pardon me?
    Mr. JOHNSON. If we try to stick with a high rate of 
overseas.
    Mr. GJERSDAL. Absolutely. Absolutely.
    Mr. JOHNSON. Thank you for your testimony. Thank you, Mr. 
Chairman.
    Chairman CAMP. Thank you. Mr. Nunes is recognized.
    Mr. NUNES. I have no questions at this time.
    Chairman CAMP. All right. Mr. Tiberi is recognized.
    Mr. TIBERI. Thank you, Mr. Chairman. To the two 
manufacturers, the pass-throughs, Mr. Hardt and Mr. Beck, I 
don't remember which one of you in your written testimony 
talked about buying a piece of machinery over $250,000. But the 
question is to both of you.
    Mr. HARDT. $270,139 to be exact.
    Mr. TIBERI. Okay. My question to both of you is, I can't 
imagine how frustrating it is in Napoleon--I am from Ohio, 
where you are from--to hear the President or others talk about 
the fact that you are obligated, you should pay more because of 
how much money you make. And I think your testimony is so very 
good to try to help educate policymakers and the rest of 
America that if you make $250,000, I think you mentioned that, 
as a business owner who is a pass-through entity, or an owner 
of a business, talk a little bit more to us today, both of you, 
real quick, what that means in terms of reinvesting in your 
business. Out of that $250,000, you have to buy machinery, you 
have to employ more employees. There are training costs. So it 
is not like you are pocketing it and saving money to go buy an 
island in Hawaii.
    Mr. BECK. As a pass-through, such as a subchapter S or a 
sole proprietorship and you have $250,000 of income from your 
company, you pay the taxes through your own personal tax forms. 
And it appears to most people that it would be your salary. But 
it is not your salary.
    Mr. TIBERI. Can you say that again?
    Mr. BECK. It is not your salary. It is what your company 
made, which means that out of that $250,000,a large portion 
goes to taxes. You may take a salary of $50,000, $60,000, 
$100,000, I don't know what people take. A Small businessowner 
might take a $50,000 annual salary. The other $200,000 (less 
taxes) would be reinvested. What is not paid in taxes would be 
reinvested in their businesses.
    Mr. TIBERI. So if the rate is 35 today and it goes to 
almost 41, the top rate tomorrow, 6 percent, that is pretty 
significant.
    Mr. BECK. I want you to know, 2 weeks ago I met with my 
joint venture partner in Germany, and I asked him if he wanted 
to invest in a company in the United States. So we compared 
corporate rates. And he said, ``Your corporate rates are too 
high.'' He said, ``The most I will invest with you is maybe 20 
percent,'' when I was hoping to have him coming in and doing a 
50 percent investment into a venture together. That is Germany.
    Mr. TIBERI. Mr. Hardt, anything to add to that?
    Mr. HARDT. Yeah, I agree. The majority of the profits that 
we make are reinvested into the business. And that is not just 
us, the surveys show it. So there is only so much of the pie to 
go around. Secondly, we need to leave a lot of our profits and 
our cash flows in the business today to keep our banking 
brethren happier, because it is tougher to borrow money today 
without a profitable business.
    Mr. TIBERI. So if the rates are increased, that is less 
that is reinvested?
    Mr. HARDT. Less that is reinvested, and it is less that can 
be potentially borrowed as well, because the banks aren't as 
happy with our cash flows.
    Mr. TIBERI. Thank you. To the three on the far left, all 
three of you American, large companies, do business overseas. I 
will start with Ms. Dossin, if you could all answer this 
question. You are competing, when you are selling a Ford in 
Italy, you are competing with German companies, you are 
competing with Korean companies, you are competing with Italian 
companies, and you as well. So the three of you, how difficult 
is it today to compete when their rates are lower and we have a 
worldwide system? And how does it benefit us as Americans when 
you are expanding in Europe or expanding in Asia? How does that 
benefit America? Does it benefit the corporate headquarters? Do 
you have more employees at the corporate headquarters? Can you 
just comment on that rather than this thought of shipping jobs 
overseas, which is a mantra of some?
    Ms. DOSSIN. Well, that is a little bit of a complex 
question, because, of course, wherever you compete, in Italy 
let's say, in Italy your profits in Italy are subject to the 
same tax whether you are BMW or Ford. It is where the more 
movable profit is, right? It is where the entrepreneurial 
profit is. It is where maybe the profit from intellectual 
property resides.
    Mr. TIBERI. But if you repatriate your profits from Italy 
back to the United States, versus if the German company 
repatriates it back to Germany, there is a disadvantage for 
you.
    Ms. DOSSIN. It tends not to be our issue. That repatriation 
issue tends not to be our issue. But I would say, it is correct 
that where the residual profit resides, for us it is 
headquarters, for us it is the U.S., and that is the pain that 
other companies headquartered elsewhere do not suffer, I will 
say, on that type of profit, on their entrepreneurial profit.
    Chairman CAMP. Just quickly, time has expired. Other two, 
just answer very quickly.
    Mr. GJERSDAL. Just a very quick example. Let's assume we 
make $100, our competitor that is overseas makes $100. We pay a 
tax rate of 35, they pay a tax rate of 24. We have $65 left, 
they have $76. It is just not a matter of making extra money, 
they now can reduce their prices by $10, $11 and beat us in the 
marketplace and hurt competition.
    In terms of jobs, yes, jobs can be created. Fifty percent 
of our manufacturing is in the U.S. A healthy company will 
promote HQ jobs. And most of our core R&D is here in the U.S., 
so, of course, expansion of R&D would create jobs in the U.S.
    Chairman CAMP. All right. Thank you. Very quickly, if you 
could.
    Ms. FORD. I would just echo briefly that I think the job 
situation is not a zero sum game, it is not U.S. jobs versus 
foreign jobs. It is if you have to have foreign locations and 
increase your foreign jobs, your U.S. jobs will increase as 
well. We found that in both our R&D center, our IT world, and 
our corporate headquarters as well.
    Chairman CAMP. All right. Thank you. Mr. Rangel is 
recognized.
    Mr. RANGEL. Thank you, Mr. Chairman. And thank you all for 
sharing your views with us. My questions are basic. I want to 
thank you once again. Territorial taxes. How does it affect, or 
how does it create jobs or any benefits to the United States? 
If U.S. businesses decide to go overseas and pay no taxes to 
the United States, but whatever the tax rates in a foreign 
country, how does America benefit? Ms. Dossin?
    Ms. DOSSIN. Well, we are not particularly a proponent of 
one system or another. But if it was pure territorial, with no 
anti-base erosion provisions, that could be a worry. I think 
that is where the anti-base erosion----
    Mr. RANGEL. Is anyone supporting a pure territorial tax? 
How can America get some taxation out of business people that 
were trained and enjoyed the benefit of being American and not 
pay any taxes at all? Paying the taxes to the foreign 
government at their lower rates? Anybody here support any type 
of territorial tax? Come on. All of you said you supported it. 
I just want to know how does our country benefit by your 
support for it?
    Mr. GJERSDAL. We support a territorial tax system primarily 
because it helps us compete with our international partners.
    Mr. RANGEL. How does it help the United States of America? 
It helps your stockholders. Is that it?
    Mr. GJERSDAL. No, it just doesn't help our stockholders.
    Mr. RANGEL. How does it help the United States of America 
that you can effectively compete with----
    Mr. GJERSDAL. Well, 50 percent of our manufacturing base is 
in the U.S. So if we can compete on an international scale with 
our international competitors, it will help our manufacturing 
base.
    Mr. RANGEL. So you are saying that the profits you make 
overseas by not paying U.S. taxes helps the base back here, 
where you hope that you will be paying a lower corporate tax?
    Mr. GJERSDAL. It certainly will help the base back here 
both in terms of our manufacturing----
    Mr. RANGEL. But if you have no base back here?
    Mr. GJERSDAL. We would never be at that point.
    Mr. RANGEL. Strike that. Suppose we create that you don't 
have to have a base here to have a U.S. business abroad. And so 
I would think under that hypothetical, we won't benefit at all, 
no jobs, no taxes, you are just a foreign company with a U.S. 
base with no jobs. That is possible too. We have to do a lot of 
work on this territorial thing. And the chairman is an 
advocate, so I think you do better explain it than they do. Not 
at this time.
    Chairman CAMP. We do have base erosion provisions in the 
draft.
    Mr. RANGEL. Okay. Okay. Let's get to the corporate tax. You 
tell me what the one impediment it is for us not to reform the 
tax system where liberals, conservatives, Republicans, and 
Democrats and others all agree that it is loaded with 
provisions that should be eliminated, that there is no problem 
in reducing the tax and paying for it by broadening the base. 
And yet when all of you get together at the country clubs and 
the cocktail parties you know what it is that stops this 
Congress, Republicans and Democrats alike, from not taking up 
this sensible reform that has us as the highest corporate tax 
provisions in the entire world.
    Now, you don't--I don't need all of you, because I am 
convinced that there is one thing that all of you have agreed 
upon that stops this from doing the right thing, economically 
and politically. Now, what is it that you believe it is?
    Okay. The chairman says maybe my question isn't that clear. 
But if everyone agrees that this is good for the country, the 
corporations, the stockholders of America generally, the 
creation of jobs that allow you to be more effective, why 
aren't we doing it? Is it a question that everyone wants to 
protect their interests? I mean, is anyone here that believes 
that when we clean it up that we should get rid of research and 
development? No.
    If we were talking about depreciation benefits, you want 
that. I just wonder whether it is a question that corporates 
want lower rates, eliminate the loopholes, but don't bother 
their loopholes. And so we can't get you guys to agree. As Ms. 
Dossin said, everything is on the table, and when we get there, 
we will tell you what we insist on and what we will, you know, 
but I--if it is such a good deal for America and the Congress, 
and you guys pay so much for lobbyists, what reason do you hear 
that we have not moved on it? Not this administration, not past 
administrations. And we are not going to do it because of what? 
Why don't you think we do it? You all are smart Americans, 
business people. Ms. Dossin, please.
    Ms. DOSSIN. For myself, I will say----
    Chairman CAMP. If you could answer quickly, because time 
has expired.
    Ms. DOSSIN. I am a chief tax officer. You know, that is my 
job. I would say that a reason is it is just darn hard. Before 
I came here, I kind of reread the story of the 1986 Act. 
Really, really hard. And you can only do it----
    Mr. RANGEL. I was here. What is the hard part of it?
    Ms. DOSSIN. It is the hard part. And we are ready, we are 
here because we are ready, the chairman is ready.
    Mr. RANGEL. We are here to do hard work. You are here to 
make us do hard work. What part of the job is so hard that you 
can't figure out why we refuse to do what we were sent here do?
    Ms. DOSSIN. Well, I think the time is right and hopefully--
--
    Mr. RANGEL. The time has been right since 1986.
    Chairman CAMP. All right. Thank you. Time has expired. Mr. 
Davis is recognized for 5 minutes.
    Mr. DAVIS. Thank you. I would point out that companies like 
Procter & Gamble, headquartered in my district, or across the 
river from my district have almost 50 percent of their 
employees are directly related to international business. So 
territorial taxation makes a lot of sense. And you know, I know 
there are a lot of undertones for manufacturers. I grew up 
around manufacturing, blue collar background, worked in 
manufacturing, run with manufacturing small business owners 
now. And you know, the only club that my friends belong to is 
Sam's. And I think that is an important thing to point out. And 
I understand this issue, the S corp issue, the pass-through 
issues.
    I would like to bring some context on these issues of tax 
reform, particularly for the small manufacturers that make up 
the backbone of the supply chain feeding into the parts into my 
Ford F-250 I have been driving for 15 years. And thanks for the 
Ford Tough. I appreciate that.
    Mr. Beck, in your testimony you took particular time 
discussing the importance of expensing, of depreciation, and 
the R&D tax credit. You and Mr. Hardt are both small business 
owners. It is the core of what I look at as a person with a lot 
of experience in manufacturing. You describe these provisions 
as especially important to cash-based manufacturers who face 
particular challenges in managing their accounts receivable and 
their working capital.
    You guys live on accounts receivable and on that weekly 
cash flow, making sure that that cycle is compressed. Would you 
please provide the committee, starting with Mr. Beck, some 
examples, very specific examples of how the AR cycles and the 
working capital needs of small manufacturers affect your 
businesses, and how these tax provisions help smooth out that 
cash flow roller coaster?
    Mr. BECK. Well, from a standpoint of a machinery builder, 
we have to have enough cash to float, with certain customers, 
$3, $4, $5, $6, and $7 million projects. Now, that is not the 
same as somebody that is making parts and components for an 
automobile company. The only way that we can possibly do that 
is to have profits, and to retain those profits and retain the 
cash in our company. And if you use some of the vehicles that 
you have talked about, like accelerated depreciation, you show 
more expense for that particular year. But what that really 
does for you, it does allow you to write off equipment faster, 
which means you have a less of a tax burden from that 
standpoint, which means you are not paying as much in taxes and 
you have more cash in your company.
    Mr. DAVIS. Let me take that to the next level. I think that 
generally we spoke before the hearing for a couple of minutes 
when we met, but we agreed that a reduction in the tax rate and 
a transition, particularly for the international businesses, to 
a territorial system would be very helpful, in a variety of 
ways. And they are important reforms. But do those reforms 
alleviate, say, the lowering of the rate, the territorial 
piece, does that alleviate the need for maintaining some sort 
of cost recovery positions in tax reform for you as a 
manufacturer?
    Mr. BECK. Boy, I am not a tax expert.
    Mr. DAVIS. Let me put it this way: What I am hearing you 
say is that depreciation expensing and R&D as part of this 
process are very important to you.
    Mr. BECK. Well, it is very important to us because you can 
recoup quicker the costs that you put out there to help develop 
something or to buy a piece of equipment, which allows you to 
expense it faster, which causes you to have less revenue in 
those years that you are doing that, which means that you are 
paying less in taxes. So you are able to hold on to your cash 
longer. And if you have gone through a situation like we have 
gone through, and banks won't even talk to you because of the 
requirements that they were under, you know, we had to hold 
onto every single penny. So basically, it sounds very 
simplistic, but it is the revenues coming in, it is the 
expenses going out. Taxes is part of your expenses.
    Mr. DAVIS. Not at all. I mean I had clients in the 1990s, 
when the Clinton tax increases, when those rates went up so 
significantly, literally couldn't hire employees to do 
additional work because of the tax hit on them as S 
corporations, closely held. Would you like to comment briefly, 
Mr. Hardt?
    Mr. HARDT. I mean the timing of cash flows is critical to a 
small business. When you are trying to grow your business, you 
have cash being tied up in receivables, money is owed from your 
customers. And of course, usually in a manufacturing business, 
you have to buy equipment as well. And of course, the banks 
want to see positive cash flow to lend you the money, and you 
have to make payroll during that whole period, including hiring 
new employees, planning for training dollars. We have great 
apprenticeship programs at all of our divisions that we fund 
internally.
    So the timing of cash flows is key. So retaining cash into 
the business, investing cash into the business, you know, 
expense deductions for depreciation to help maximize that cash 
flow during investment time periods is very important to us, 
extremely important.
    Mr. DAVIS. Great. Thank you. I yield back, Mr. Chairman.
    Chairman CAMP. Thank you. Mr. Buchanan is recognized.
    Mr. BUCHANAN. Thank you, Mr. Chairman, for holding this 
important hearing. Also, I would like to thank our witnesses 
today. According to Enterprise Florida, which is our economic 
development arm in Florida, there are 17,000 manufacturers in 
Florida. They employ over 300,000 folks out of Florida. These 
skilled personnel represent about 5 percent of the State 
workforce in the State.
    In my district, Atlantic Mold and Machine opened about 5 
years ago. It is a family-run businesses that specializes in 
high-precision plastics and metal molds. And again, I grew up, 
I was chairman of the Florida Chamber, and I was in business 
for 35 years, employed a lot of folks.
    I want to get back to Mr. Hardt and Mr. Beck. I got to tell 
you, I did a hearing where we had small business people in 
there about 2, 3 years ago, and I just for one reason or 
another started the hearing out with having people raise their 
hand in terms of that had challenges with their banks, either 
got their line of credits reduced or whatever. I thought it 
would be about 20 percent. About 95 percent of the people in 
the room raised their hand where they had challenges.
    It gets back, my point I want to try to make here, when we 
talk about employment, or people, they talk about 3 percent of 
businesses I heard a gentleman say, the bottom line, there 
might be 3 percent of small businesses as they measure at 500 
employees or less, but the reality of it is, is what is that 
percentage in terms of revenues and in terms of jobs? I know a 
lot of middle market companies that are considered small 
companies, but they might employ 300 employees or 400 
employees.
    So from a tax standpoint, what do you think would be the 
simplest--what would be best in terms of helping your 
businesses moving forward in terms of based on where the Tax 
Code is at today? I mean, my sense what I hear is people want a 
simpler, fairer, flatter tax. The Tax Code is 73,000 pages. 
What would your thought be, based on where we are at today, 
would be the most helpful, Mr. Beck, to your business?
    Mr. BECK. Well, when I was filing my taxes on a paper 
basis, and now it is electronic, I think I had a stack that I 
brought home from the accountant that was about that high. Now, 
you can imagine the intricacy and the amount of work that goes 
in to create those tax returns. To tell you exactly what the 
percentage ought to be, I think that needs to be worked out not 
by us, but by the committee, because you are looking at the 
revenues that the government needs.
    However, a flatter tax, a simpler tax, one that doesn't 
change with the wind, one that is set helps businesses plan 
accordingly for the long term. You know, we have to be able to 
plan for the long term. We have to be able to look out 2, 3, 4, 
5, 6 years. You know, when I developed this product, I got the 
R&D tax credit. It is now 5 years into it, and we haven't made 
a penny off of it yet. We are hoping in this next year that we 
can bring it to market. So we have to look out. And small 
businesses are in it for the long term. They are not in it 
month- to-month. Small businesses are not looking at the 
quarterly or the monthly return, they are looking at the long-
term viability of their company. So we need a very stable Tax 
Code. And we need one that competes internationally.
    Mr. BUCHANAN. Mr. Hardt, I know we have touched on it quite 
a bit, but I think it is important for people to understand, as 
both of you know, that if you make 750, you don't take home 
750. And if you make 750 in a company, you end up paying a 
third out to taxes, you might take out 100 each or whatever you 
need to live in terms of your own, and the balance stays in, 
the banks require it. Do you want to expand on that anything 
more? I know you touched on it a couple times. But I don't know 
that it can be touched on enough, because a lot of jobs are 
created through these pass-through entities. And when you put a 
floor in at 250 and you have got 100 employees and the banks 
are requiring more and you are paying out a third of what you 
make to taxes, you know, that is not a great thing in terms of 
where we are at in terms of our country.
    Mr. HARDT. I will simplify it and put it into numbers. In 
Wisconsin this year, our capital budget is about $2.3 million. 
We have already hired five new apprentices in the spring, we 
hope to hire five new apprentices this year, and we have some 
open positions for engineers, et cetera, as we grow our 
business. Our profit projection for this year is about $2.4 
million. So 2.4 million is going to go through personal tax 
returns as a pass-through entity, $2.3 million is going back 
into the business. I can't simplify it any further. You cannot 
look at this as just money going into our pockets, going into 
our clubs, whatever we say here. The overwhelming majority of 
small business profits goes back into the business. It is our 
livelihood, it is the future for hopefully our families and 
children. And again, I also support simplification, however, 
because we need to plan. We need to plan how to transition our 
businesses to the next generation, how to plan to grow our 
businesses. So simplification and transparency are very 
important.
    Mr. BECK. It is uncanny, my numbers are almost exactly as 
his. Almost exactly. And my salary isn't even $100,000.
    Mr. BUCHANAN. Thanks, gentlemen. I yield back.
    Chairman CAMP. Thank you. Mr. McDermott is recognized.
    Mr. MCDERMOTT. Thank you, Mr. Chairman. Ms. Dossin, you 
said it is complicated. And I would like to enter into the 
record an article from the National Journal called Guns and 
Stethoscopes.
    Chairman CAMP. Without objection.
    [The article follows: The Honorable Jim McDermott]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. MCDERMOTT. In 1992, I had a memorable discussion with a 
manufacturer. He was the H.R. person from a major automobile 
company. And he said, you know, our costs, number one is steel, 
and number two is health care costs. And taxes is way down 
there somewhere. He said, I could look across the river into 
Windsor and see automobiles made for $2,000 less than they are 
made in the United States because of health care costs. He 
said, our second biggest expenditure, Blue Cross Blue Shield of 
Michigan. So the President has been trying to deal with making 
manufacturing more competitive. And one of the things he did 
was come out with the Accountable Care Act. Now, I would like 
to ask all the six of you who have companies, how many of you 
provide employees with health insurance?
    Ms. DOSSIN. Ford does.
    Mr. GJERSDAL. 3M does.
    Mr. MCDERMOTT. You can just put your hands up. All six of 
you do, right? How many of you support the effort at the 
Accountable Care Act to shift and make sure that everybody is 
in and try and get ahold of costs and get the free riders out 
of the system? How many of you supported it? Did Ford?
    Ms. DOSSIN. I am not sure of the question, and I am not a 
health care expert, but I think that Ford does not have to 
adjust much of anything in reaction to that Act----
    Mr. MCDERMOTT. Okay.
    Ms. DOSSIN.--because of what we already do.
    Mr. GJERSDAL. I am the vice president of tax. I am really 
not a specialist in health care. So I really cannot comment on 
that. If there is anything that I can do after the hearing to 
get you an answer, I would be happy to.
    Mr. MCDERMOTT. Okay. Let me get to the guys who are buying 
it for themselves, the two in the middle.
    Mr. BECK. All I can say to you is our that health care rep 
came in the other day and said he has seen the largest 
increases ever for health care for companies of our size. So if 
you ask me if I support that, I have to say no.
    Mr. MCDERMOTT. And that is different from last year? Last 
year you didn't have an increase?
    Mr. BECK. We have increases all the time. But he said the 
increases are substantially higher coming.
    Mr. MCDERMOTT. And you?
    Mr. HARDT. Our plan increase for 2013 is over 12 percent. 
We spend over $12,000 for family and over $8,000 for single 
right now. There are certain provisions, in reading the 
voluminous Act, that we can support, but overall I think a 
simplification is what we really support.
    Mr. MCDERMOTT. So what I hear you saying, all of you, is 
you in the corporate sector want to keep control of your own 
health care costs to your employees. You want to do it. You 
don't want any help from us. Is that right? That is not a cost 
item you worry about. I guess if you are going to hide behind 
the silo of being a tax person, I don't know how to deal with 
you, because it is so simplistic to come in here and talk about 
taxes as being the only issue that affects a company's 
profitability.
    The big issues are not taxes, they are these other 
personnel costs and material costs that when you buy something, 
you buy a machine that is $250,000, I don't know where that 
ranks in terms of the costs in your company in terms of the 
health care costs. What is your health care bill in comparison 
to that?
    Mr. HARDT. Our health care bill is rather substantive. It 
is a big part of what we do. I just mentioned the numbers per 
family and per individual.
    Mr. MCDERMOTT. What percentage is it of your expenses every 
year?
    Mr. HARDT. Approximately 10 percent.
    Mr. MCDERMOTT. How about next? Mr. Beck?
    Mr. BECK. I don't know the number off the top of my head.
    Mr. MCDERMOTT. You don't know how much you spend on health 
care? You really don't?
    Mr. BECK. No, I don't.
    Mr. MCDERMOTT. Wow.
    Mr. BECK. But it is a substantial amount. And I would guess 
it is probably about 10 percent.
    Mr. MCDERMOTT. And how much are your taxes? What percent of 
your expenses go into taxes?
    Mr. BECK. It depends on whether we are losing money or 
making money.
    Mr. MCDERMOTT. So it could be nothing. But you still got to 
pay that 10 percent in health care?
    Mr. BECK. Yeah. You have to pay that health care part. But 
you know, oftentimes when the health care has gone up, we have 
had to shift some of that cost back into the individual because 
we couldn't cover it as a company.
    Mr. MCDERMOTT. When I listened to you, I thought it is very 
interesting you would get involved with a guy from Germany. 
Germany has had a national health plan since 1883. And he comes 
over and he looks at your business and says to himself, why 
should I buy into this crazy health care system they have in 
the United States, which has no control? They are spending 12 
percent of GDP on health care costs, we are spending 17, and 
you don't have any control whatsoever. The rep comes in and 
says here is what it is going to cost you next year. So what I 
have a hard time understanding is how taxes gets all the 
attention, when nobody wants to talk about what happens in 
health care. It is like----
    Chairman CAMP. Time has expired.
    Mr. MCDERMOTT. It is not because of taxes we have got 
problems in productivity.
    Chairman CAMP. Quick answer, please.
    Mr. BECK. I prepared today for taxes, I didn't prepare 
today to talk about health care. I am sorry.
    Chairman CAMP. All right. Thank you. Mr. Smith is 
recognized for 5 minutes.
    Mr. SMITH. Thank you, Mr. Chairman. And thank you to our 
witnesses today. I am wondering a little bit about temporary 
tax policies that we know abound, and certainly emphasis on the 
temporary nature. We have to renew them oftentimes on an annual 
basis. I was wondering if any one of the businesses could 
reflect a little bit how you plan for that, whether it is a 
business plan from the beginning, or how you plan for that for 
the future, on the temporary nature of so many of these tax 
provisions.
    Mr. GJERSDAL. Well, the problem is, you really can't plan 
for it. Take the R&D credit, which is really the classic. We 
assume that eventually it will be renewed. It may or it may not 
be. But the fundamental question becomes with that kind of 
uncertainty, how could it ever go into a business person's 
decision in making a decision? That is the fundamental problem. 
I can plan for it in my tax rate, but I can't recommend to a 
businessman to take it into account in making a business 
decision.
    Mr. SMITH. And so then the cost of compliance, I mean that 
is slightly different, but certainly needs to be considered as 
well given the complexity. Do you ever put an actual number to 
the cost of compliance?
    Mr. GJERSDAL. Well, we are fortunate we are a cap audit 
taxpayer. And so we have reached agreements with the IRS as to 
how to compute the credit, how to compute the manufacturers' 
deduction. So our cost of compliance in those areas has gone 
down substantially. But before that, it was a very, very 
expensive proposition both at the time of computing it, and 
then also at the time when you had to discuss it with the IRS, 
and needless to say, have a controversy.
    Mr. SMITH. Okay. Anyone else? Can you elaborate then on 
that process with the IRS that you went through?
    Mr. GJERSDAL. The cap audit process? It is a program that 
was established I think it was about 7 or 8 years ago. 
Basically, what it allows you to do is have a much more open 
relationship as a large corporation with the IRS. Through this 
process, we are current now on our audit. We are basically 
closed through 2010. Our requirement is to be much more 
transparent. We have to disclose all our transactions during 
the year as they occur. The IRS, on the other hand, their view 
is to get the audits done. So they don't bring up all these 
frivolous issues that they used to bring up. They bring up key 
issues.
    It is not like we don't have controversies. We still do 
have controversies. But when you think about it, 5 years ago we 
had issues going back 10 years. That creates a lot of business 
uncertainty. Today, our 2010 audit is done. Think of the 
business certainty that creates.
    So I really applaud the IRS in this effort. This has been a 
wonderful process we have been involved in. The other companies 
we know of that are involved in it also think it is a very good 
process.
    Mr. SMITH. Mr. Hardt, could you reflect on the temporary 
tax provisions and the cost of compliance?
    Mr. HARDT. I think the uncertainty again weighs on a small 
business's mind more than anything else. You pick up the paper 
in the morning, you hear what is going on in Europe, you are 
not sure what your tax bill is going to be at the end of the 
year. We both of us in particular, and all of us, lived through 
the great recession a couple years ago and how we had to 
struggle to get through that. The uncertainty of the current 
Code causes you to be cautious. It causes you to maybe not make 
that investment you would like to make to see if you can make 
it pay off, but it causes you to be cautious. That is the 
biggest thing I can comment on.
    Mr. SMITH. Mr. Beck.
    Mr. BECK. I think it is basically the same thing as what 
Mr. Hardt said. I mean, I really can't elaborate on it much 
more other than if it is simplified and more stable, then we 
can plan further out. And as far as the R&D tax credit, we had 
never taken an R&D tax credit until we started the R&D this 
particular machine. A small company doesn't have ideas like 
this every day. Maybe in a larger company it might be used more 
often. But it did certainly play into our final decision 
whether or not the R&D tax credit would help us alleviate some 
of the risk going forward. So I have to admit that in this 
particular case, it made sense for us. But overall, just 
knowing what the taxes are, and knowing they will be stable 
over a longer period of time certainly is helpful to small 
businesses.
    Mr. SMITH. Okay. Thank you. I yield back.
    Chairman CAMP. Thank you. Mr. Lewis is recognized.
    Mr. LEWIS. Thank you very much, Mr. Chairman. Let me take 
this opportunity to thank all of the witnesses for being here. 
Dr. Boushey, I grew up in Alabama, where we once had booming 
manufacturing industries. Most of the south did back then. But 
manufacturers are gone, the jobs are gone, and left behind 
hundreds and thousands of families who have struggled and 
continue to struggle to find their place in America's middle 
class.
    Can you repeat for the members of this committee why 
keeping manufacturing here in the United States is good policy 
for local community and families? And I want you to feel free 
to speak from your heart.
    Ms. BOUSHEY. Thank you, Congressman. Thank you. This has 
been just a very interesting hearing. There is a couple things 
on that. I mean, certainly manufacturing has traditionally 
provided solid middle class jobs. And there is some new 
research by an economist Susan Helper from the Brookings 
Institution and her colleagues that shows that manufacturing 
workers are paid about 8 percent more even once you account for 
all of the characteristics of jobs and those workers. So even 
once you account for the fact that these are union workers, 
these workers are paid more than other nonmanufacturing 
workers. And the research has shown, and of course, I am not a 
business expert like all of you, but the research has shown 
this is because those workers also have specific skills.
    Which gets to the second reason why manufacturing is 
vitally important to our economy, which is one of the key 
sources of innovation. There is a lot of emerging economics 
research that is showing, and you from Corning talked about 
this, I think very eloquently in your testimony and here today, 
that there is what economists call either industrial commons or 
other reasons why having different kinds of manufacturing 
together, both suppliers and the companies that they are 
working with, in one place creates innovation and vitality. And 
if our country wants to remain a leader in the world in terms 
of technology and innovation moving forward, making sure that 
we support that manufacturing base so that when you talked 
about the glass being very thin, needing to be near where the 
TV screens or whatever is being made, that is being done in 
Asia or wherever for a reason. We want those kinds of synergies 
to be happening here in the United States.
    So it is not just having one, you know, kind of 
manufacturing, but having that variety is very, very important 
and vital, and important if we want to remain a leader in terms 
of technology in the next century. And then finally, 
manufacturing plays a vitally important role in our macro 
economy. I mean, over the course of the recovery, manufacturing 
has been a leader in terms of job gains. It has been very good. 
That has been very encouraging to hear. But it is also vitally 
important for our trade deficit. Over the long term, this is 
something we are going to need to address. And if we don't 
start bringing manufacturing back into this country as one of 
the easiest ways we can address our trade deficit, and if we 
don't, we are going to have to continue to borrow from abroad, 
and eventually we will have to pay that back.
    If we don't deal with this, we will be looking at a lower 
standard of living in the decades to come. And I would add that 
energy is a key component of this. You know, as we both deal 
with rising energy costs in terms of oil that we are importing, 
and we are all looking for new ways to produce energy, green 
technologies, the extent to which we can do those here will be 
good for our trade deficit 10, 20, 30 years down the road.
    And then one just note, Congressman Smith, on your question 
on things about uncertainty, there is a lot of uncertainty 
right now about the extension of a number of the tax credits 
and provisions for manufacturing in the green sector, including 
the production tax credit and the advanced energy manufacturing 
tax credit, which are causing a lot of uncertainty for 
particularly those manufacturers.
    Mr. LEWIS. Dr. Boushey, one member of the panel, responding 
to our colleague Mr. Johnson, said that you made it on your 
own, that you developed your own business. Don't we all live on 
this little piece of real estate we call America? And what 
about the roads, the bridges? Or what about the transit system? 
What about the clean water, the sewer system? Could you 
respond?
    Ms. BOUSHEY. Well, I am glad you asked that question 
because this is of profound importance. I was reading The New 
York Times this morning, and there was an article on the cover 
of the paper about Stockton, California, which is about to go 
into bankruptcy. And talking about how they don't have any 
police, murders have doubled, that there is this devastation in 
this American city, a lot of which is because they don't have 
tax revenues. And we have just lived here through in the 
District of Columbia this massive power failure, hundreds of 
thousands of people without power for over a week because of a 
set of storms. These are our Nation's infrastructure. And if we 
don't have safe streets, if we don't have electricity that you 
can count on, if you don't have roads and bridges and all the 
things, and importantly a public school system that can compete 
with the rest of the world, we will not be able to remain an 
economic powerhouse.
    If we do not educate the next generation that can create 
the kind of workforce that all of these companies benefit from, 
we will not be able to do that. So while any innovator, and of 
course, small business owners, they take an enormous amount of 
risk, an enormous responsibility for moving their investment 
forward, but they do so because they can hire workers that had 
been educated in their community and because they can build on 
the infrastructure that is there. These are two pieces of 
puzzle, and we need to think of them always simultaneously.
    Mr. LEWIS. Thank you, Dr. Boushey. Thank you, Mr. Chairman.
    Chairman CAMP. Thank you. Ms. Jenkins is recognized for 5 
minutes.
    Ms. JENKINS. Thank you, Mr. Chairman. Good hearing. Thank 
you all for being here. Mr. Hardt and Mr. Beck, in your 
testimony, you both raised the issue of the impact of the 
estate tax and the effect it has on family-owned businesses. 
Mr. Hardt, in your testimony, you made the point that the 
primary reason for structuring a business as an S corp is the 
hope that someday you can pass along that business to your 
children.
    Family-owned businesses, from farming and ranching families 
to family-owned manufacturing companies such as yours deserve 
an opportunity to pass that business from generation to 
generation, and preserving these good paying jobs in our 
communities. I believe families shouldn't be forced to sell 
their farm or their business to pay estate tax. So I am a 
strong supporter of a full repeal of the estate tax. But I was 
wondering if you could each comment or tell me personally how 
the estate tax has affected your business and your decision-
making, and what recommendations might you have for Members of 
the Committee on how we could treat the estate tax and any tax 
reform proposal.
    Mr. BECK. Well, because of changes in the estate tax it 
would be more advantageous to plan when you die. But I can't 
plan on when I am going out. And so an estate tax needs to be 
set so that a businessowner can have something to plan around. 
Because ultimately you get to the point where you can't plan 
for how much cash you would have to generate to keep the 
business in your family.
    I think that is the biggest fear that a lot of family-owned 
companies have. How do you pay that estate tax burden? Do you 
start saving for that tax burden a the expense everything else 
you are trying to do--while you are trying to buy machinery, 
you are trying do R&D and you are trying run your business? How 
do you finance it if you come to the point where you have a 
huge tax burden to try to keep the business into your family?
    Let me tell you from the standpoint of a family-owned 
business, (I am not saying that large companies don't treat 
their people well, because they do treat them well) there 
certainly is a closeness that we have in our company. It is 
important to us that our people are successful. When our people 
took 40 percent pay cuts because we were trying to survive, I 
was worried about those people, that they couldn't pay their 
mortgages on their homes and that they were going to lose their 
homes. They stuck by us through that whole thing. And I truly 
believe that family-owned businesses have a real closeness to 
their employees, and really want to try to help their 
employees. And when often times you have to sell your business, 
it gets sold to a bigger company. Then when business gets bad, 
they just close them up or they consolidate them down.
    And that is what happens if you can't keep the business in 
your family. So I think estate tax planning is very critical 
for keeping these family businesses for long term and for 
protecting employees and small enterprising companies. I also 
want to say is when it comes to infrastructure, I paid a lot of 
taxes for infrastructure. I think I paid my fair share. And I 
do believe we all as companies pay our fair share in 
infrastructure. We are part of the infrastructure of this 
country because we pay taxes to support it. I got a little off 
topic.
    Ms. JENKINS. No, I totally agree. Mr. Hardt.
    Mr. HARDT. I want to follow up on the infrastructure thing 
too, I mean, after coming through the great recession, I am 
glad to pay taxes. Those weren't fun years.
    Anyway, the issue of estate planning is very important, and 
again, I am going to put the tone on as a manufacturer. A 
manufacturer has to put a lot of capital back into the 
business. So a lot of us are faced with estate taxes, whether 
uncertain, or certain, with the decision if we can't put enough 
money back into the business because we have the huge estate 
tax liability to pay for, then it results in almost an 
inevitable sale, and we have many second and third generation 
workers working within our business, just as we have four 
family generations.
    So from a manufacturing standpoint when you have to invest 
so much capital back into your business, an uncertain estate 
tax, or the ability to plan for such, does result in a sale too 
often a time, and usually it is not good for the business.
    Mr. BECK. No.
    Ms. JENKINS. Thank you. Mr. Chairman, I yield back.
    Chairman CAMP. Thank you very much. Mr. Thompson is 
recognized.
    Mr. THOMPSON. Thank you, Mr. Chairman, and thank you to all 
of the witnesses who are here today. I appreciate your coming 
in, and appreciate what you do, and what your companies do, and 
all of your employees. It is very important to our economy, and 
very important to our country, and I don't think I speak for 
myself when I say that I want to do all that I can to help make 
sure that business in America is successful.
    It is important to the entire country, and to our future, 
and I think tax reform is a very, very big part of that, but I 
do want to say that tax reform has got to be smart. It has got 
to be smart, and it has got to do a couple of other things. It 
has got to keep jobs in America, and it has got to bring jobs 
back to America. It needs to be revenue neutral, and as one of 
the witnesses said, it needs to pay the freight. It needs to 
pay the bills on everything that our country does.
    I think that Mr. Lewis was very specific on those issues, 
and the sewer systems, the highways, et cetera. And I don't 
think we can just pick a number out of the air to say that is 
what the corporate rate should be, and that 25 percent number 
has become the kind of number of the week, or the month. And I 
was very interested in when all of you who own and run 
businesses talked about what should be on the table to get to 
25 percent.
    This is the second hearing similar to this that we have 
had. The last one, I don't remember all of the witnesses, but I 
know Caterpillar was here, a couple of the big corporations, 
and they were all very specific. They said almost to a person, 
take all of the other tax expenditures away. Just get us down 
to a number. And that was about the 25 percent number, I think.
    I understand that from the people that advise us, that you 
can't get to revenue neutral at 25 percent, even if you get rid 
of all of the tax expenditures. It gets you down to about 28 
percent. So if you do that, you can't just put it on the table. 
You have got to pay for it. If you don't pay for it, we are in 
a bigger soup than when we started. And I think, Mr. Beck, you 
talked about that.
    You talked specifically about how you were able to pull 
through this recession because you had very little debt, and 
that you were fiscally responsible. And I think that is an 
important takeaway for us, because we have to be fiscally 
responsible as well. And ``fiscally responsible'' means that we 
pick up the tab, or at least part of the tab for education, 
because you can't educate your own workers. We pay for a Navy 
that keeps the shipping lanes open, that allow you to move your 
product overseas; a Coast Guard that responds to emergencies on 
the water; the medical professionals that Mr. McDermott talked 
about; the infrastructure that is so critically important to 
your companies.
    Secretary Geithner was in before this committee, and told 
us that the infrastructure problems we have is a hidden tax on 
the very people that are before us today testifying. And I 
think we all, we all know that, and that is not--that is not 
helping your business either.
    I also want to mention that the American jobs stuff is 
critically important. And it is not all going overseas. As a, 
matter of fact, we are seeing a change in that. A lot of it is 
coming back. I visited with a person just last week in my 
district who has seen his business grow by about, I think, 18 
percent per year. And he has got--he is a supplier to one 
company. He makes stuff for snowmobiles and ATVs, and his 
growth is because they are not making their components in China 
anymore, because they have huge costs for quality control. They 
have to send somebody over there to make sure that it is done 
correctly, and they--the cost of shipping stuff back and forth 
is extremely expensive.
    They are better off making it, Factory Pipe in Ukiah, 
California. And I think it is a prime example of the sort of 
thing that we need to figure out how to make that more 
prosperous so that you and your colleagues can continue to grow 
jobs overseas.
    But I think we need to be honest and fair about it. We 
can't just pick numbers out of the air. We need to do it in a 
way that balances the books, and is able to pay for the things 
that allow all of you to run the companies that you run so well 
today.
    So I hope we can get to that, and I hope we can have a good 
discussion on that. Mr. Chairman, thank you.
    Chairman CAMP. Thank you. Mr. Marchant is recognized.
    Mr. MARCHANT. Thank you, Mr. Chairman. I represent a 
district that basically surrounds the DFW Airport. So I have a 
very small geographical district. So when you land at DFW 
Airport and you begin to drive through my district, you see the 
corporate headquarters of not Ford, but companies like Exxon, 
and Fluor, and these multinational, and you begin to get the 
impression that this is the main driver, business driver in my 
district. But the truth is, it is the small manufacturing 
companies that have gravitated there near the airport, near the 
multinational companies that are there basically to serve the 
needs of, to supply these larger companies.
    When you begin to talk about taxing incomes over $250,000 
at a higher rate, you are not talking about really taxing the 
large multinational companies. You are talking about talking 
about taxing those small manufacturing companies who rely 
totally on retained earnings to fund their equipment purchases, 
your grinder, to fund new jobs being created, the three 
positions that will operate that grinder, and you are talking 
about the physical expansion of their plant facilities.
    All of these companies use their retained earnings to do 
that. If you raise the tax on those retained earnings an 
additional 5 or 6 percent, the direct result of that will, 
there will be 5 or 6 percent less money put into facilities, 
equipment, and new job creation.
    So it has a very detrimental effect on it. And it is really 
to the advantage of the big companies who rely very heavily now 
on just-in-time inventory, rely on the efficiency of the 
smaller manufacturing and the smaller and mid-sized companies 
that are out there that are providing all of this.
    So I believe if you begin to target, what I would call the 
job creators in any kind of a tax reform, or any kind of a tax 
extension, that you will eventually end up driving costs higher 
at the large company level. Now, that is my comment.
    My question to all of the companies here is, since an 
increasing number of targeted business tax expenditures are 
enacted on a temporary basis, is there a greater value in a 
permanent tax rate reduction than these temporary benefits that 
must be renewed by Congress every year or so? And I will start 
with Ms. Dossin.
    Ms. DOSSIN. I think that is undeniable. It would be far 
better to have a stable system that would inform good decision-
making. That is what we would hope for.
    Mr. MARCHANT. Thank you.
    Mr. GJERSDAL. Just one word, absolutely.
    Ms. FORD. I would agree. I think the temporary provisions 
are particularly painful. Corning, in particular, benefits from 
the look-through as well as the R&D credits, and having those 
bounce temporarily is very troublesome.
    Mr. HARDT. Again, uncertainty, I think I have used the word 
about ten times so far. It makes it very difficult to plan when 
you have all of the things on your mind as a small business. I 
believe that a stable, longer-term environment is what we all 
need. I would also, however, state that I also agree that if 
there is anything that can be retained or implemented to 
encourage investment in our country, to encouraging people to 
get into manufacturing, stay in manufacturing, that should be 
considered.
    Mr. BECK. I just think a stable tax is the best tax. I 
probably would lean more a little bit the other way. If you had 
a lower tax, and you had to give up some of these other things, 
at least we know the playing field that we are playing on. 
Faster depreciation and R&D tax credits certainly are important 
incentives for manufacturers, and we certainly appreciate those 
incentives. But at what cost? I think stability to me is still 
the most important thing.
    Mr. SPINKS. In a capital-intensive business like ours where 
it takes typically 2 to 3 years to build a plant, understanding 
what the tax result will be when the plant is finally placed in 
service 2 or 3 years down the road, and the predictability of 
that is a huge, huge advantage and a game changer, I think.
    Ms. BOUSHEY. I would like you to point you to a couple of 
citations in my testimony about what lowering the rate in a 
revenue-neutral way would do to a variety of industries. So 
that would lead to the elimination of many of these deductions, 
and there is some work by an economist named Martin Sullivan 
who showed that if you reduce the rate in a revenue-neutral 
way, this would be most detrimental overall to domestic 
manufacturing in his analysis, and that the biggest winners 
would be securities who would see a net reduction of 12.3 
percent, insurance, credit intermediation and retail trade and 
bank holdings, so reducing the rate overall, but eliminating 
these deductions would primarily go to finance and retail, 
while overall, it would mean a net in aggregate increase for 
manufacturing, and in particular, computers and electronics 
would see the largest increase in their taxes under that 
proposal. So I do think that there is--it seems to be that 
there are some concerns.
    Chairman CAMP. Thank you, Mr. Blumenauer is recognized.
    Mr. BLUMENAUER. Thank you, Mr. Chairman. I would hope, just 
a question to Mr. Beck and Mr. Spinks at some point, not now, 
but if I could just get a one-page explanation about the 
reinvestment in the business. You were talking about the uptick 
in the tax rate would be a disincentive for you to invest in 
the business, and my understanding is that in many instances, 
the reinvestment is a deductible expense.
    And so if you could just explain on one page at some point, 
we don't have time to go into it now, and I am probably not 
smart enough to understand it, if you could explain to me 
whether or not these are deductible expenses and how that works 
for your enterprise.
    I am sorry, my friend, Mr. Davis, is not here because he 
talked about the negative consequences of employment when the 
Clinton tax increases were put in effect.
    Because if memory serves, the 8 years of the Clinton 
administration, there was something like 22 million jobs 
created, versus less than a tenth of that during the 8 years of 
the Bush administration with two rounds of tax reductions. But 
I appreciate the range of discussions that are here, because I 
think there is no question, but what as a result of hearings we 
have had, and conversations we all have, that the tax system is 
broken. And the focus on manufacturing is important because as 
I look at the manufacturers that I represent, they are some who 
manufacture in the United States. They are some of the few 
people who actually pay that statutory rate.
    As you know, that top statutory rate is not what most 
businesses pay. The average is much less than that. But it is 
manufacturing in the United States that gets hammered. And so 
your helping us focus on that, and think about how we protect 
that and move forward, I think is very, very important.
    I appreciate what my colleague, Mr. Thompson, talked about 
in terms of how we go forward and how we are balanced. Because 
despite all of the rhetoric, we are collecting less in tax as a 
percentage of our Gross National Product, than any time since 
Truman was President. So tax collections are down in the 
aggregate. We have a growing and aging population. Something 
has got to give. We want to help manufacturing. We have a 
system that is not particularly rational, but it seems to me we 
need to be able to look at the big picture.
    I was intrigued the reference to Germany. Germany has a 
total corporate hit of somewhere in the neighborhood of 49 
percent when you look at all of the business costs in. When you 
look at the amount of money that governments collect from 
business, the United States is 27.3 of total revenue that come 
from business.
    The average of the OECD is 36.2 percent. So these collect 
more from business and they have almost without exception, much 
higher personal income tax rates. So if we are going to 
undertake a change and pay our bills and not much less deal 
with what has been referenced this infrastructure deficit, we 
have got to figure out how to get about this.
    One of the differences is all of these countries we are 
competing with have a value-added tax along with the 
territorial system. So they make up the gap by having a 
substantial revenue flow. And again, there isn't time, and I 
don't want to trap anybody, but I would hope that if any of you 
have some thoughts about how a value-added tax would fit into 
long-term, we would welcome that.
    If you have got super policy people, or you just have some 
random thoughts, I spend a lot of time on airplanes going back 
and forth every week to Oregon. So in addition to reading your 
testimony, I would really love if you have some thoughts about 
how a value-added tax might fit into this. Thank you, Mr. 
Chairman.
    Chairman CAMP. Thank you. Mr. Reed is recognized.
    Mr. REED. Thank you, Mr. Chairman. Ms. Ford, if we could 
spend a little time together here. I wanted to explore a little 
bit more in detail your comments that you offered on the 
transition rules, because one thing that I have come to the 
conclusion, and I am glad to be at this conclusion, is that it 
is not a question of if we are going to do comprehensive tax 
reform; it is a question of when. So in order to prepare for 
that, I would like to have a little bit more of your comments 
and detail on the issues dealing with transition and transition 
rules and what are the pros and cons that you could offer us? 
What issue will be you focusing on?
    Ms. FORD. Certainly, I think there are pros and cons to the 
general concept that in order to go to a territorial system, we 
have treat the cumulative foreign earnings that are have 
existed to date in a certain way. I think the current proposal 
that Chairman Camp has put forward is that all of the earnings 
that have accumulated abroad would be taxed immediately prior 
to the transition, and that they would be taxed at a reduced 
rate.
    I think, obviously, the pros there are for companies trying 
to compete is that the reduction in rate helps reduce the 
overall liability. I think the concerns are that all of the 
cumulative earnings are not necessarily in the form of cash, 
and so to some extent there is a disparity between the actual 
money we could bring home under that, and the amount that we 
would be taxed on.
    So I think that is a major concern. And then some of the 
things that can help address that concern are the permission to 
use carryover losses and foreign tax credits that have accrued 
over time to reduce that cash liability, and I think allowing 
it to be paid over time is helpful. And maybe some indication 
or agreement to limit the amount that is subject to tax to the 
extent that there is a very huge disparity between the cash 
available, and the actual earnings.
    Mr. REED. So as a small business owner, that was always 
something that was so important to me, is that cash is king.
    Ms. FORD. Cash.
    Mr. REED. And if those bills are due, you have to have the 
resources to pay for it. So I appreciate that. And then on 
option C, you mentioned it as part of the base erosion 
protection issues. Can you also gets a little bit more in 
detail what the pros and cons of pursuing that option would be?
    Ms. FORD. I think one of the common themes that applies to 
any tax reform is that the devil is always in the details. I 
don't think there is anyone on the panel that will disagree 
with me there. I think the biggest concern with respect to 
option C is how broad that base becomes. The reduction in the 
tax rate on income from intangibles is of course very helpful. 
It is competitive compared to some--compared to some of what 
our competitors enjoy, but I think the biggest concern is, is 
how will that base be defined? To the extent that there is 
foreign source income or foreign source intangible income in 
foreign locations, the challenge is how much of that would be 
brought into and be subject to this tax. I think that is the 
greatest concern.
    Mr. REED. I appreciate that. And Mr. Gjersdal, do you have 
any comments on option C, again, in particular, the pros and 
cons of what is being proposed and can you over some insight 
from 3M's perspective?
    Mr. GJERSDAL. Well, 3M historically has had 100 percent of 
its IP here in the U.S. The only IP that is actually offshore 
is the IP that we might have acquired in acquisition, and it is 
simply too expensive to move back here.
    So any type of option that would go after some of the 
abuses that do exist with IP offshore, you know, I think would 
be welcomed; welcomed by me. At the same time, I think we do 
need a kind of a carrot-and-stick approach, and that is that 
the carrot approach is why would we not do more to encourage 
research and development here in the U.S., and IP ownership 
here in the U.S. We spend a $1.6 billion each year on R&D. Our 
R&D credit is $20 million. Obviously, that is not going to 
change a whole lot of minds in terms of where we investment.
    But if we did something like the patent box which is 
becoming quite common in Europe as a carrot, you might see a 
fundamental change in the way IP is developed and owned by U.S. 
companies.
    Mr. REED. And why is that so important to keep that IP here 
in America?
    Mr. GJERSDAL. Well, I mean certainly, the patent 
protection, and I am not a patent lawyer so I can't address it 
in detail, but certainly the patent protection, having the IP 
here. The fact that where the IP is also going to encourage 
where it is developed. For 3M, our fundamental innovation is in 
the U.S., is in St. Paul. Thirty-two percent of our products 
that we are selling this year have been developed in the last 5 
years. We want to keep that innovation here in the U.S. We do 
have labs offshore. That is a necessity of our business also, 
but we want to keep the base innovation here.
    Mr. REED. And with that base innovation, I would assume the 
jobs that are associated with it, like in Corning, my hometown 
of Corning, those are typically your research scientists, your 
engineers, and others; is that correct?
    Mr. GJERSDAL. Correct, and then obviously, a successful 
company adds to the headquarters staff. Fifty percent of our 
manufacturing is here. And to be perfectly honest, if you look 
at some of the really innovative stuff that we have, for 
instance, we have revolutionized the abrasive industry over the 
last 5 years. That technology is not going anywhere. We are 
going to keep it here. We are going to make it here. That is 
simply not technology we are going to readily put offshore. 
Other technologies, however, that are older and less IP 
protected, certainly, manufacturing ends up offshore, because 
we are a short cycle supplier. Our customers are demanding that 
we be close to them, very much like the Corning example.
    Mr. REED. And I appreciate that. I know my time has expired 
and with that IP being here, I always keep the hope out that 
manufacturing would then blossom next to the IP center here in 
America. With that, Mr. Chairman, I yield back.
    Chairman CAMP. Thank you, Mr. Kind is recognized.
    Mr. KIND. Thank you, Mr. Chairman. I, too, want to thank 
our panelists for your testimony here today. It is helpful and 
we have been hearing countless hearings throughout the year on 
what comprehensive tax reform should entail. So getting this 
feedback, I think, is very beneficial. But unless or until, and 
I have made this point in previous hearings, unless we start 
putting something in draft, putting something on paper, we are 
all dealing in a 30,000-foot theoretical level, because we all 
know that at the end of the day, and the chairman knows this 
and every member of the committee knows this, once you put 
something on paper, you are immediately going to be creating 
winners and losers, no matter what we do. It is just going to 
make reform very, very difficult.
    And that is why we are going to be asking you to do some 
pretty hard calculations, and those of who you are 
representatives of the manufacturing sector of this country, of 
what you are willing to live with, and what you are willing to 
give up for the sake of a shared goal of trying to lower rates, 
broaden the base, and simplify, simplify, and simplify.
    Now, we are getting contradictory messages from some of you 
witnesses here today, where you are telling is, not all of you, 
and Mr. Gjersdal, we had a nice conversation about this, and 3M 
is--you were clear with me yesterday, and you were clear in 
your testimony today that you are willing to give up a lot of 
the expenditures that you currently take for the sake of a 
lower rate and I appreciate that. But you can't have both, and 
we are hearing from some of you that you like lower rates, but 
you would also like to keep R&D. You like to keep depreciation. 
You like to keep 199.
    And that is the concern that I have. Because the goal of 
trying to get to 25 percent, the Congressional Budget Office 
already told us that in order to try to get there, we have to 
take away every tax expenditure that exists on the C side. And 
even then, the best we can do is get to 28. So if the goal is 
really to get to 25, then somehow you are going to have 
supplant that lost revenue and dip into the pass-through side. 
So Mr. Hardt, Mr. Beck, that is when your ears perk up, as they 
should in a hurry. Because I don't think you are going to be 
willing to pay more as a pass-through entity for the sake of C 
corps getting a lower 25 percent rate if we are going to do 
this in a deficit-neutral fashion.
    And yet, most of the expenditures that are talked about 
being eliminated are the ones that directly benefit 
manufacturing. And Dr. Boushey, I want to ask your opinion in a 
second of what the impact would be on the manufacturing sector 
of our economy if we do take away R&D, if we do take away 
depreciation, we do take away 199 for the sake of lowering the 
rates and broadening the base, because I happen to believe that 
a country as great as ours, we have to have the ability to make 
things, and to produce things, and to invent things, and create 
things, and grow things, but we are no longer going to be a 
super power in this world.
    And therefore, I think there would be more interest on this 
committee of what type of changes we have to make in the Tax 
Code that would benefit companies such as yours that make 
things, and invent things, and create things here in the United 
States of America.
    That is why earlier this year I introduced legislation 
called the Promoting American Manufacturing Act, which calls 
for reducing the manufacturing rate from 35 to 20, for those 
that make things, for those manufacturers of our country. And 
we are not going to be able to do that for every industry, for 
every sector of our economy. But what is being pitted right now 
against each other are basically your manufacturers and your 
technology sector, versus everyone else, from the retailers, 
the wholesalers, financial corporations, the service sectors, 
who are paying a high rate right now, but they are not getting 
these deductions. They would love to have a lower rate. But in 
order to get there you are going to be taking away a lot of the 
expenditures that directly benefit manufacturers in the 
process.
    And we need help in trying to figure this out, and you guys 
are going to have to make those hard calculations of what you 
are willing to live with for the sake of lower rates, what you 
are willing to give up. But maybe Dr. Boushey, I ask you first, 
and then Mr. Hardt, I want to go back to you to get your 
perspective on this, too. But what do you think will be the 
impact on domestic manufacturing if we take those expenditures 
off that directly benefit manufacturing in the high-tech sector 
today just for the sake of lowering rates for everyone?
    Ms. BOUSHEY. Well, from where I sit looking at the big 
picture as an economist, it seems like that would be bad for 
U.S. manufacturing, and we already have an industry that 
certainly has been in trouble, that has been--we have seen a 
decline in many ways in manufacturing employment, and as a 
shared GDP, and I think it should be a national goal to make 
sure that manufacturing remains a vital part of our economy and 
grow it.
    And so these kinds of tax expenditures that seem very 
important to manufacturing should not be done at the expense of 
lowering of the rate, when a lowering of the rate, at least 
according to all of the analysis, if you did that in a revenue-
neutral way, would disproportionately benefit other industries 
like finance, and insurance, and retail, which while are, of 
course, certainly important, don't have the pivotal place that 
manufacturing plays, both in terms of job creation, but also as 
a key sector for innovation.
    Mr. KIND. Dr. Boushey, not to sound too crass in my 
analysis and listen, I don't hold myself out as an expert, but 
if you take a look at the manufacturing and tech sector, these 
jobs are highly mobile. You guys can go anywhere around the 
globe, where it makes sense for you to do it. But you look at 
the other sectors, retailers, wholesalers, financial, the 
service sectors, they are less mobile. I mean, where are they 
going to go? They have to stay here in the United States, 
provide jobs here, because this is where the customer base is.
    Chairman CAMP. Your time is expired, so if you could just 
be brief.
    Ms. BOUSHEY. Okay, not only are they less mobile, but they 
don't create the same kind of innovation effects that are so 
critical for us remaining the sort of the economic powerhouse 
that we have been.
    Chairman CAMP. Thank you. And I would just say, Mr. Kind, 
the tax expenditure report that you mentioned is incomplete. It 
does not include all of the tax expenditures and it is not 
necessary to get rid of every tax expenditure in order to get 
to 25.
    So Mr. Brady is recognized for 5 minutes.
    Mr. BRADY. Mr. Chairman, thank you for hosting this 
hearing. We are hearing from iconic American companies, and to 
top it off, we have a company headquartered in Texas. So it 
doesn't get any better than this panel.
    Clearly, if America wants to have the strongest economy in 
the world for the next 100 years, we have to get our Tax Code 
right. Today, despite what you see on the campaign trail, there 
aren't incentives in the Tax Code to send jobs overseas. The 
Tax Code itself is the problem, making it harder to locate 
jobs, especially manufacturing jobs here in merge.
    The Ways and Means Committee led by Chairman Camp last fall 
laid out a draft proposal to make us competitive again, both 
lowering the rate, moving to a territorial system to make sure 
that we are not out of sync with the rest of America, allowing 
companies both to compete overseas and to bring those profits 
back to invest in America.
    The President has, in a less specific way, outlined two 
general approaches. He, too, wants to lower the rate which I 
commend. But he keeps in place, or at least the White House 
keeps in place the territorial system, the outdated system we 
have today. In fact, even removes some of the provisions that 
would create double taxation risks for companies. Looking at 
those two approaches, the draft that has been laid out by this 
committee, and from the White House, I want to start with our 
business witnesses.
    From a competitive standpoint, both competing around the 
world in the competition you face here in America, do you have 
a preference on which concept, which direction allows you to 
compete best going forward?
    Ms. DOSSIN. My written testimony, and I think my oral 
today, said Ford does not have a particular position. We think 
a variety of different approaches could work.
    Mr. BRADY. So may I ask, so a territorial, you would be--
you have no problem leaving the territorial system in place, 
the worldwide system in place?
    Ms. DOSSIN. Well, I mean, we have been working with that 
for some years. To us, the low U.S. tax rate is the single-most 
powerful thing, and because of our profile, because of where we 
historically have operated near our customers, our profile does 
not suggest to us a leaning strongly one way or the other. But 
if it is territorial, anti-based erosion provisions are really 
important.
    Mr. BRADY. Okay.
    Mr. GJERSDAL. We clearly support the chairman's proposal, 
at least the outline of the chairman's proposal. As far as the 
lower rate is concerned with the base broadening, we create a 
more even playing field here in the United States, and make the 
U.S. more competitive internationally. Territoriality is really 
a separate issue. It will enable us to compete with our foreign 
competitors, so both are really important. One does not go 
without the other. But clearly, the chairman's proposal would 
be our preference.
    Mr. BRADY. Thank you.
    Ms. FORD. I think our preference would also be to shift 
more towards a territorial system, because so many of our 
competitors and customers are located internationally and those 
companies have territorial systems that leaves it as an unfair 
advantage. We do spend some time when we look at expenses in 
the U.S., funding our R&D, funding our corporate headquarters. 
We do spend a lot of time analyzing, is it actually cheaper to 
borrow in the U.S. to fund those activities instead of bring 
money home that we already own. So I think it is a significant 
issue for companies like Corning and territorial would be more 
competitive.
    Mr. BRADY. Great, thank you. Mr. Hardt.
    Mr. HARDT. Well, the territorial doesn't really impact us, 
being a domestic manufacturer. One point to Mr. Kind, there is 
an exhibit in my testimony on a tax template, how the tax 
changes would specifically impact pass-through manufacturers, 
so that is in my testimony for the review.
    Again, I have to state that the ability in the Tax Code and 
we are a capital-intensive business, and that is what we have 
to remember here. We are a capital-intensive business, so we 
need profits to reinvest in our businesses; we need profits to 
leave in our businesses in order to borrow money. So an overall 
effective tax rate will clearly allow us to do that. However, I 
continue to encourage the fact that since we are a capital 
investment business, if there is anything that can be retained 
to assist with those incentives, it is for the best of all us.
    Mr. BRADY. And can I make a point there? I think this is a 
healthy discussion, one we have wanted to have for a long time. 
The reason we have held almost 20 hearings on this issue, 
having a discussion about the lowest rate possible, or pro-
growth Tax Code, the cost of capital and the impact, this is 
all part of getting to, I think, the best Tax Code we can 
create for our companies. So thanks for that.
    Mr. HARDT. Well, working with manufacturing capital 
investment isn't just about us. I mean, I have 120 suppliers to 
me. We have service businesses in our community that respond to 
our capital----
    Mr. BRADY. Got it. Can I hear real quick from Mr. Beck and 
Mr. Spinks?
    Chairman CAMP. Real quick, because your time is expired.
    Mr. BECK. Being territorial doesn't affect us either, but 
going back to accelerated depreciation, when you talked about 
that, I have been in this business and running it for 35 years. 
I bought machinery where we didn't have accelerated 
depreciation, and I have bought machinery where we have had it. 
When you have it, it is certainly may be an incentive intended 
to make a decision that you may not make ordinarily because you 
have that advantage. It certainly can help when the economy 
isn't good.
    Mr. BRADY. Good.
    Mr. BECK. But I have lived under both.
    Mr. BRADY. Thanks, Mr. Beck, I have run out of time. Mr. 
Spinks.
    Chairman CAMP. Mr. Neal is recognized.
    Mr. BRADY. Thank you.
    Mr. NEAL. Thank you, Mr. Chairman. I appreciate Mr. Brady's 
emphasis on the lowest possible corporate tax rate. Mr. 
Gjersdal, would you comment on the idea, if you had the option 
of a 27 percent rate, or giving up R&D, which one would it be?
    Mr. GJERSDAL. For the R&D credit versus 27 percent?
    Mr. NEAL. Yeah.
    Mr. GJERSDAL. 27 percent.
    Mr. NEAL. 27 percent. We would be assured that you would 
never have anybody come back for looking for the R&D 
afterwards?
    Mr. GJERSDAL. Well, I mean, right now, it is such a small 
number that it really doesn't affect our decision-making 
process right now.
    Mr. NEAL. It is a big issue in Massachusetts, to be very 
frank, as you might expect.
    Mr. GJERSDAL. And obviously, every corporation is in a 
different position.
    Mr. NEAL. And we have had these conversations back and 
forth. I appreciate the testimony. It is really very, very 
helpful. The problem is, that at this stage of the question and 
answer period, every question either has been asked or 
exhausted. So what is the--after the issue of taxation, what 
for manufacturers is the next big issue? Any member of the 
panel.
    Mr. GJERSDAL. Well, if I could, I have noticed today that 
there is violent agreement to do something, and that is really 
encouraging. The problem is, is what we do has to recognize 
that we are now in a global economy, and a global economy--and 
a globe that is becoming smaller and smaller every day. We 
can't look at the past as to how we might do manufacturing. We 
have to look at the future as to how we might do manufacturing 
and where can the U.S. succeed. Everyone wants the U.S. to 
succeed. There is no doubt about that. But you have to go 
overseas and see what is going on in other places to see how 
much we have to learn how to compete in this economy.
    Mr. NEAL. And the other panelists, what other 
considerations would you have just besides the issue of taxes?
    Mr. HARDT. Definitely a skilled workforce is very important 
to us. It takes skilled and talented employees to innovate.
    Mr. NEAL. Are we falling down on that front?
    Mr. HARDT. To be very honest, we usually have to take young 
apprentices and send them to community colleges for basic 
skills in mathematics and everything else just to get them into 
our apprenticeship programs. We are falling down a little bit 
on the basics.
    Mr. NEAL. Okay, the other panelists?
    Mr. SPINKS. To be honest, I think as an internationally 
headquartered company, we still see the United States as 
probably the premier place in the world to do business. But 
when we compare the tax rates that we see in other 
industrialized countries to the United States, there is a 
serious disadvantage here.
    Mr. NEAL. Okay, Ms. Boushey.
    Ms. BOUSHEY. I would like to direct your attention, there 
was an article yesterday in The Wall Street Journal that talks 
about a number of firms that are insourcing, in-shoring back to 
the United States, and they cite a number of examples for why 
they are doing it. Some of it has to do with patent protection, 
some of it has to do with education, and a skilled workforce, 
but there is a long list of things that is not just about taxes 
that is very--I will get this to you.
    Mr. NEAL. I saw the article and you gave me the run-up. Any 
of the panelists, are you considering bringing jobs back right 
now for those of who you have international interests?
    Ms. FORD. I think as a general rule, our view is if we grow 
internationally, we grow domestically as well. And I think 
since the recession, I believe we added about 1,500 jobs in 
China, because many of our businesses sell to Chinese markets 
and we added 2,000 in the U.S. So but I don't think it is a 
zero sum game. I think we continue to add in both.
    Mr. NEAL. Fair enough, Mr. Hardt.
    Mr. HARDT. We have added jobs back, and again, exports are 
a big part of our business, 22 percent overseas. So you know, 
international and globalization is part of what we have to deal 
with every day.
    Mr. NEAL. Okay, Mr. Gjersdal.
    Mr. GJERSDAL. Well, as a short-cycle material supplier, if 
our customers come back to the U.S., we will be coming back to 
the U.S.
    Mr. NEAL. Any immediate plans to?
    Mr. GJERSDAL. We are not seeing that great of an increase 
in U.S. manufacturing at this point in terms of our customers, 
but as I say, when they do come back, I mean, we will be right 
next to them.
    Mr. NEAL. Great. Ms. Dossin.
    Ms. DOSSIN. We locate where our customers are. So I will 
just channel Alan Mulally and say profitable growth for all is 
what we want for all parts of the world. So U.S. included.
    Mr. NEAL. Okay, just a last comment, Mr. Chairman. One of 
the frequent concerns that I hear from the manufactures where I 
live, it really is the issue of skills. I hear it all of the 
time. And the fact that they are subsidizing additional 
education, remedial education, and then on to the community 
college, which is a very important part of the economic 
discussion in America. But it is a frequent topic of discussion 
now. And again, particularly with the high-end manufacturers.
    Chairman CAMP. I couldn't agree more. I mean, it is an 
issue and obviously, that is something that the workforce 
committee and Chairman Kline are trying to address. And this 
committee's general focus is tax policies and tax issues, but 
understanding there are a variety of issues that affect our 
ability of our businesses to compete, and grow, and create 
jobs. But at this time, I recognize Mr. Schock.
    Mr. SCHOCK. Thank you, Mr. Chairman. I am specifically 
interested in the several small business owners that are 
represented on the panel here today. Are you guys aware of the 
President's comment this past week about business owners? And 
if so, I am just curious your perspective.
    Mr. BECK. Yes, I am. And it is interesting. I talked to a 
number of small business owners, and they weren't, needless to 
say, very happy. They said, ``I am sure glad you are going to 
speak to the House Ways and Means Committee because you won't 
use any uncivil swear words in front of them, but we would 
because of the feelings that the small business people have 
back in our communities about those types of words,'' about 
what President Obama had said. And I said to myself, you know, 
these people are really upset.
    Mr. SCHOCK. Anyone else wish to comment? I am just curious 
because I will tell you, as an entrepreneur before I came to 
Congress, maybe I was foolish to think that it was my hard work 
that helped me be successful, and the businesses that I had 
worked in that I thought I was building, but I know some of you 
are a little bit older than I am and perhaps been in business 
longer than I was. And I thought maybe I would like to get your 
perspective, because I found them very spellbinding when I read 
them first, and then saw them, that as we talk about jobs, we 
talk about a President with a record of unemployment for the 
longest period of consistency in my lifetime, and we are all 
throwing up our hands here in Washington, D.C. wondering why 
people won't hire.
    And the Commander-in-Chief, the leader of the free world, 
says things like, if you built a business, if you have a 
successful business, you didn't build it. Somebody else did. 
Somebody else made that happen.
    Mr. BECK. Every one of us wants to see our business grow. 
Every one of us wants to be profitable. Every one of us when we 
are profitable, we pay taxes. When we pay taxes, we pay for the 
infrastructure. We are part of the infrastructure of this 
country.
    Mr. SCHOCK. I just thought that you had a perspective on 
who made you guys successful if it wasn't, in fact, you and 
your----
    Mr. BECK. I think my colleague over here already said it. 
We, along with our team, and those people that work with us 
each day, made our company successful. We never asked for a 
penny from anybody. And we have paid our fair share in taxes.
    When I went from 110 people down to 25, I couldn't ask for 
a government bailout. There were no loans that were going to 
keep my doors open. We had to figure it out ourselves. And our 
people took great sacrifice in salaries and worked really hard 
to help pull the company back out of the hole. We are now 
seeing some real strength in our company as we have come back 
from it. But to--but we would never have received any help from 
any place. We would have just gone away. We are only 110 
people. We would have just gone away.
    Mr. SCHOCK. Well, as one elected official, I want to say 
thank you, because I believe you guys are the ones who create 
jobs. And I believe that you are successful as businesses 
because of your work ethic, your ability to take risk, your 
willingness to put in the time, talent, and energy necessary to 
be able to do so. So know that there are some of us on Capitol 
Hill who recognize why small businesses and entrepreneurs are 
successful.
    With that, I want to ask some specifics on tax reform as it 
relates to manufacturers. I am curious if anybody up here 
represented small or large, currently utilizes LIFO in their 
accounting practices. Ms. Dossin, could you maybe please speak 
to this, because I know we have had scores of businesses small 
and large come to my office, and we have had testimony here 
from big companies, small companies, and most of them say what 
you have said, which is get rid of the credits, get rid of the 
deductions.
    I know Caterpillar, which is in my hometown said, look, we 
will give up R&D even though we use it. Get us down to 25 
percent, and we will give it all up. LIFO seems to be one that, 
because of its retroactivity in terms of the tax collection, it 
is not moving forward, that has the potential to really put 
some businesses out of business.
    And I am just curious to what degree it would affect you if 
LIFO was repealed moving forward, but also the retroactivity in 
terms of the liability it would mean for you? Have you guys 
looked at that?
    Ms. DOSSIN. We have, but you will notice it was not part of 
my testimony because it wouldn't have been effective for me to 
come here and say I want to lower rate and A, B, C, D, E, F, G, 
right? So I didn't list it as one. It will be painful to lose 
it, but I think the degree of pain is not what you hear from 
some others.
    Mr. SCHOCK. Would you agree that it is important for us to 
try and, when eliminating deductions, accounting practices, 
whatever you want to call them, that we do it moving 
proactively, and that we limit what is retroactive? In other 
words, I would assume if we tried to get back all of the 
depreciation retroactively that the bonus depreciation has 
awarded over the last couple of years, there might be some 
screaming and gnashing of teeth if we tried to do that. LIFO 
seems to me to be a similar mechanism where going forward is 
one discussion, proactive, but retroactivity seems a lot more 
harmful.
    Ms. DOSSIN. Well, once----
    Chairman CAMP. Your time is expired, so if you could just 
answer as fast as you can.
    Ms. DOSSIN. I will just say, once you have the bones of an 
idea of a tax package, transition rules are going to be really 
important, and you won't want to cause harm in the transition.
    Mr. SCHOCK. Thank you.
    Chairman CAMP. Thank you. Mr. Pascrell.
    Mr. PASCRELL. Yes, Mr. Chairman, we are now 19 months into 
this Congress. We have yet to see comprehensive jobs agenda, 
let alone a comprehensive manufacturing plan.
    We have already established, I think, reestablished today 
that while we complain about regulations and taxes, they 
apparently were not the cause of what happened beginning in 
2006 to the manufacturing sector going back 20 years. What 
concerns me is that from January of 2000 to January 2010, we 
lost--the United States of America lost 5.5 million 
manufacturing jobs. In my home State of New Jersey, we lost 11 
percent of our manufacturing base.
    A recent study by Alan Blinder and Alan Krueger, who is the 
chairman of the President's Council of Economic Advisors has 
shown 1/4 of American jobs--this is what really concerns me--
are potentially offshoreable, with 80 percent or over 600,000 
of these jobs in manufacturing.
    That is almost 150,000 manufacturing jobs in New Jersey, 
300,000 in Michigan, over half a million in Texas, and 365,000 
in Ohio. The light of our economic recovery is powered by 
domestic production. You are right. Over the past 2 years, the 
manufacturing sector has added 400,000 jobs. Who would have 
thought 2 years ago that this would be the lead factor in 
getting the economy started and starting to get the economy 
back on its feet.
    The first period of sustained growth since the 1990s, we 
need to enact policies to keep up the momentum, and that is why 
the gentleman and ladies are here today. The recently released 
nonpartisan Congressional Budget Office report entitled 
``Fiscal Policy Options for Increasing Economic Growth and 
Employment in 2012 and 2013'' has made it clear that what we 
can be doing is reducing cost of adding employees and 
investing.
    Those are two things that are available to us if we have 
the urge to do that. Yet, we have great legislation to do just 
that; we have been unable to move it, including bipartisan 
legislation with 100 percent expensing for capital 
expenditures.
    To me, that is a no-brainer. I think it is a no-brainer to 
all of you. Today the Senate will block action on legislation 
that I have introduced, the Bring Jobs Home Act aimed and 
lowering the cost for companies looking to in-source jobs back 
to America.
    Ms. Boushey, I even had to battle some of my own party 
about my belief that manufacturing provides a substantial 
economic impact. Can you elaborate on how it helps drive our 
economy in your eyes?
    Ms. BOUSHEY. Well, it drives it in a number of ways. I 
mean, looking immediately at the short-term certainly 
manufacturing as a sector has one of the biggest multipliers of 
other industries, so when you create a job in manufacturing, 
you create many more other jobs in other sectors than you do if 
you create a retail or a service-sector job. So certainly, in 
the short-term, the fact that the recovery has been led by 
gains in manufacturing has certainly been something that has 
been optimistic, that certainly we could gain on.
    But second, I think that one of the key ways that 
manufacturing is vital for our economy, is because it is--
manufacturing is where innovation happens. And so if we want to 
be the kind of economy that creates the next great inventions, 
we need to be the kind of economy that supports the kinds of 
sectors in our economy that employee engineers, that employee 
the innovators of the future, and manufacturing certainly does 
that.
    So it has both the big multiplier effect, it has the 
innovation effect. And I would just add that it is also 
critically important for our macro economy.
    Mr. PASCRELL. So we made a big mistake in listening to 
corporate America 30 years ago, in moving towards a service 
economy while we have lost millions and millions of 
manufacturing jobs, and really reviving the old Jefferson-
Hamilton debate that we did not have to have a multifaceted 
economy. And Jefferson, the great hero of America, told us, 
let's keep on our path, and agriculture will see to the 
conclusion. Hamilton was correct.
    Can you compare how the 20 percent tax credit for 
insourcing in the Bring Jobs Home Act would help employment in 
the United States as opposed to proposals to exempt overseas 
profits from U.S. taxes?
    Ms. BOUSHEY. That is a long question.
    Chairman CAMP. And if you could respond in writing because 
time is expired, the committee would appreciate that.
    Mr. PASCRELL. Can she give a short answer, Mr. Chairman?
    Chairman CAMP. If you can give a few-second answer.
    Mr. PASCRELL. Thank you.
    Ms. BOUSHEY. Certainly, I think would it be better to 
encourage firms to relocate to the United States than to stop 
taxing their ventures overseas. But I will----
    Chairman CAMP. You can elaborate in writing to the 
committee. Thank you, Mr. Berg is recognized.
    Mr. BERG. Thank you, Mr. Chairman. I really appreciate you 
being here. I am from North Dakota, and North Dakota a long 
time, our manufacturing has been a core passion of mine. You 
know, I come out here and our challenge as a country is, quite 
frankly, we need more revenue. And manufacturing, we always 
used to use the term ``primary sector.''
    Manufacturing creates new wealth in America. And I mean, 
that is a core fundamental of our economy, and it has worked 
for a long time. I look at a lot of the rhetoric out here and, 
you know, 95 percent of our consumers live outside the United 
States.
    What we should be doing is not focused on, worried about 
foreign competition as much as we should say, how can our 
manufacturers be that competitor in all of these foreign 
markets? And very clearly, as you have talked today, we have 
heard about that.
    One question, Mr. Hardt, I mean, obviously you don't have a 
lot of foreign--my understanding is you don't do much business 
outside of the United States.
    Mr. HARDT. We export to 15 different countries, about 22 
percent of our sales.
    Mr. BERG. So it is big.
    Mr. HARDT. A big part of our business.
    Mr. BERG. My question really was, you know, even if there 
are companies that aren't exporting out of our country they are 
still facing that foreign competition from their customers, 
they are making different choices. Let me just--I had a thought 
the other day, and we heard it today. And the thought is, your 
profit, you have got a partner that is taking 1/3 of your net 
profit. That partner is the Federal Government. They are not 
putting $1 of capital in, but kind of, they are your partner. 
And what we are here sitting here today, this is like a 
different board of directors for that silent partner.
    I am just frustrated because the Federal Government should 
be doing everything it can do to help you increase your 
revenue, increase your profits. And I am sitting here thinking, 
it can't be for American manufacturing, at the same time, 
increase the cost on that manufacturing and increase the 
uncertainty on that manufacturing. You know, and that is kind 
of what we have heard over and over again.
    My question really gets down to, we are talking about a 
flatter, fairer tax, and we heard some comments that that is 
bad for manufacturing. I guess my question here is, if we go 
with a flat tax, flat or fair tax, 25 and 10 percent like we 
have talked, got rid of some of the exemptions, not all of the 
exemptions, there are some key ones we talked about, research, 
et cetera, but it was a net dollar equal, would your company do 
better in that environment? Would they make more money, which 
obviously, the great comment about making $1.4 million and 
investing $1.3 back in capital.
    So I would just like to ask the manufacturers here, if it 
was a flat tax or a flatter tax from what we have got, would 
that generate more revenue for your company?
    Ms. DOSSIN. I will give you a quick answer, but I might 
have to think about that one a little bit, because I suspect 
what it would do is allow business decisions to be made on the 
basis of business factors more than tax factors. And we hope 
that is good everywhere we operate. So I think it is 
directionally correct.
    Mr. GJERSDAL. Devil is in the details, but rough math would 
tell me we would do a lot better.
    Ms. FORD. Similarly, we would also do better because our 
competitors are more international and their tax costs are much 
lower.
    Mr. HARDT. A stable longer-term system would help us with 
better business decisions.
    Mr. BECK. And it would be the same for us. You normally 
make a decision based upon the business first, and then the tax 
second.
    Mr. SPINKS. I completely agree that a more competitive rate 
versus the other countries in the world would achieve, go a 
long way towards the real goal which is to increase investment 
in the United States.
    Mr. BERG. Again, Ms. Boushey, you mentioned that report 
that said the exact opposite, and we are hearing from 
manufacturers, and I couldn't agree with you more. So anyway, 
this along with some stability in your regulatory environment, 
I think would help American manufacturers be more competitive, 
and would bring more manufacturing jobs in America. So thank 
you for being here today.
    Chairman CAMP. Well, thank you. Mr. Crowley is recognized.
    Mr. CROWLEY. I thank the chairman. I am going to go right 
to questioning. Ms. Dossin, would you agree that the U.S. 
manufacturing industry, and more specifically, the U.S. auto 
industry, is in far better shape than it was on January 19, 
2009?
    Ms. DOSSIN. I guess so, yes.
    Mr. CROWLEY. You would agree with that. I would agree as 
well. I think that the deal that was worked out by Ford's CEO, 
Alan Mulally, as well as with President Obama, and working with 
Democrats here in the House on a rescue package for the U.S. 
auto industry, and it worked, and literally saved millions of 
jobs, and created new jobs in our economy.
    Would you, Ms. Dossin--Ford received a Federal loan 
guarantee from the Department of Energy through the advanced 
technology vehicles manufacturing loan program in the amount of 
$5.9 billion. The goal of the loan was to provide capital to 
the U.S. auto industry for the purpose of funding projects that 
help vehicles that are manufactured in the United States. Did 
this program benefit Ford and saved jobs here in the United 
States?
    Ms. DOSSIN. In my testimony, I talked about all of the 
things Ford did to restructure itself. And that included, you 
know, completely overhauling a great deal of the business, and 
once we did that and reached a point of financial viability, we 
were in a position to go look for funding to accelerate the 
plan. And when we do that we will go to the lowest cost source 
of funding. And we did go to the government for those----
    Mr. CROWLEY. So you would agree that that particular loan 
program----
    Ms. DOSSIN.--for the loans, and it did support jobs in many 
facilities. Probably----
    Mr. CROWLEY. Ms. Dossin, my time is very limited, so that 
specific loan program was beneficial to your company, was it 
not?
    Ms. DOSSIN. It was.
    Mr. CROWLEY. Okay, so you would agree that these loan 
programs are generally beneficial to job creation, would you 
not?
    Ms. DOSSIN. They were a good low-cost source of borrowing 
at the time.
    Mr. CROWLEY. Thank you. Mr. Beck, if President Obama did 
not create a rescue package for the U.S. auto industry, a 
package championed and crafted with the support of Ford CEO 
Alan Mulally, where would your business be today?
    Mr. BECK. Well, I think Ford would have probably survived.
    Mr. CROWLEY. Where would your business be today?
    Mr. BECK. Very good.
    Mr. CROWLEY. You would be good if GE--I am sorry, if 
Chrysler and GM had gone under?
    Mr. BECK. Right now, most of my work is with Ford.
    Mr. CROWLEY. So you think that overall--do you think that 
Ford would have survived had the others gone down?
    Mr. BECK. I think Ford would have survived.
    Mr. CROWLEY. I think many economists would disagree, 
including Mr. Mulally----
    Mr. BECK. I just gave you my opinion.
    Mr. CROWLEY. And I am going to--it is my time, so I am 
going to take it back, and I am going to say that many 
economists would disagree with your position, and would suggest 
that the entire industry would have collapsed and therefore, 
your business, had we taken the Romney approach of let Detroit 
go bankrupt, I think your business would have gone the way of 
the Studebaker.
    Finally, I just want to follow up on what my colleagues Mr. 
Johnson and Mr. Schock were talking about before in terms of 
interpreting what President Obama's comments on how no one is 
an island, and America is a society. And so that behind every 
successful small business is another hand to help them get 
there.
    I would like to think that I didn't get to Congress on my 
own; that the fact that my parents saw to it that I had the 
right kind of education, helped along the way, that people 
helped get me elected, helped me get here as well. So people 
are ridiculing him because they are parsing the words, 
distorting his words, but I think the President was right.
    Mr. Hardt, do you think that we as a Nation, that we owe a 
debt of gratitude to our veterans? Do you think that you would 
be where you are today without the work and sacrifice of our 
veterans and the men and women who died to protect the 
interests of this country?
    Mr. HARDT. That is clearly an important part of our 
society.
    Mr. CROWLEY. You would agree, would you not? An important 
part of our society, people dying to maintain our way of life 
is an important part of society?
    Mr. HARDT. Correct.
    Mr. CROWLEY. That is the level of enthusiasm you give to 
that?
    Mr. HARDT. I am not here to have political labels.
    Mr. CROWLEY. Again, I am surprised by the lack of fervency 
there.
    Do you think that we owe a debt to those individuals? Do 
you think that your company could have survived had America not 
survived, had those soldiers failed in their attempt to 
maintain our way of life, our capitalist way of life?
    Mr. HARDT. No way we could have survived.
    Mr. CROWLEY. I am glad that you agree that your business 
would not have survived had those sacrifices not been made.
    Chairman CAMP. Mr. Crowley, I have to say that this line of 
questioning is really not on topic.
    Mr. CROWLEY. Mr. Chairman, it is on topic.
    Chairman CAMP. You have a few seconds. Why don't you 
conclude.
    Mr. CROWLEY. With all due respect, Mr. Schock raised this 
point and I am clarifying the point Mr. Schock raised.
    Chairman CAMP. Complete your questioning.
    Mr. CROWLEY. I will. Thank you, Mr. Chairman. None of us 
would be here, none of us without the patriotism and 
dedication, and sacrifices of our veterans. So I urge all of my 
colleagues to stop questioning the patriotism and dedication of 
our military, our veterans, and stop playing politics with the 
President's remarks.
    Chairman CAMP. The gentleman's time has expired.
    Mr. CROWLEY. No man or woman is an island.
    Chairman CAMP. The gentleman's time has expired. Ms. Black 
is recognized.
    Mr. CROWLEY. Thank you, Mr. Chairman.
    Mr. PASCRELL. You can hit the gavel all you want.
    Mrs. BLACK. Thank you, Mr. Chairman, and I want to thank 
the panel for being here today. It is a very good conversation 
on topic about our tax reform and the necessity for that, and I 
want to thank you all of you, both the large companies and also 
the smaller companies. Having been a business owner who started 
a business, I can say that I know those challenges that we 
have. But I want to turn our attention to one area that has not 
really been explored fully, is to look at why foreign companies 
invest in the United States.
    And we know that nearly 40 percent of all of those foreign 
direct investments by global companies into the United States 
are connected to manufacturing, which statistics show, directly 
translate into about 2 million jobs, which is pretty important.
    Mr. Spinks, probably this question is best for you. How 
does the United States tax system affect those choices that are 
made by those foreign-based manufacturers when they evaluate 
whether to invest in the United States or to go to another 
country?
    Mr. SPINKS. Thanks. As I said in my testimony, we do look. 
We are in many, many countries around the world. We evaluate 
our projects on an after-tax cash basis. And when we look at 
the other industrialized nations, particularly in the OECD, 
what we are seeing now is a U.S. tax rate that is the highest 
in the world. So what it means is that the mathematics of 
getting to an after-tax return on investment, it is very, very 
difficult when you have got corporate rate differences of 7 to 
10 percentage points.
    In the particular case of Air Liquide over the last 5 
years, even with the global recession, we basically doubled 
down on the U.S. economy. We have doubled our investment in the 
United States in the last 5 years. We would like to continue to 
do that. And we think that a system that is more predictable, 
more simple, and with a more competitive tax rate will allow us 
as well as a lot of other global companies to do exactly that.
    Mrs. BLACK. Thank you. I want to now just talk about the 
fact that we need to have all of this. We need to have the 
global investment into our country, the smaller businesses, and 
then also the larger corporate businesses that do worldwide 
work as well.
    And Ms. Ford, I want to turn to you, because you noted that 
the major of the Corning's employees are located right here in 
the United States, but 80 percent of those sales are to 
customers located abroad and that Corning also has extensive 
foreign operations.
    How do you, or how, excuse me, how do your worldwide 
operations affect your U.S. operations in employment, such as 
areas of R&D, and headquarter jobs?
    Ms. FORD. Thank you for the question. Because we conduct 
probably 99 percent of our research and development here in the 
United States, and we are a technology manufacturer, we send 
our engineers all over the world to our plants where we are 
located close to our customers, and there is a very strong 
exchange there. So when--at the location they need a certain 
development piece and they need something done, much of that 
comes back to the U.S., and we add R&D jobs to support it.
    And certainly our corporate headquarters is here in the 
U.S., as well as our IP is maintained here in the U.S., and so 
we have our fill of lawyers and accountants, and corporate 
folks, and they are also all located in the U.S. So, you know, 
I have stated previously that it is not, you know, it is not a 
zero sum game. It is not U.S. jobs versus foreign jobs. As our 
foreign markets grow and we are able to continue to compete 
there, we add U.S. jobs as well.
    Mrs. BLACK. I think the importance here is to say that it 
takes all of this to make a vibrant economy. It is not one. It 
is not just the small businesses. It is not just the large 
businesses. It is not the investments that come from foreign 
entities, but it is the combination of, and I really appreciate 
you all being here today and sharing what it is from your 
individual perspective that would be good for moving the United 
States forward in our taxing area to be able to continue to 
have and grow a more vibrant economy. So I thank you all so 
much, because I think this dialogue is so good as we move 
forward.
    I think the time, and several of you mentioned this, that 
you believe that the time is here. I believe the time is here. 
Obviously, the chairman believes the time is here, and I want 
to commend him for putting a draft out of the territorial so 
that you all will have the input, and it is with us all working 
together as partners that are going to bring us to the 
conclusion of doing good tax reform that will continue to move 
this country forward to be the strongest economic country in 
the world.
    So thank you so much, and thank you, Mr. Chairman, for this 
very interesting hearing.
    Chairman CAMP. Well, thank you. And this concludes our 
hearing. I want to thank all of our witnesses for taking time 
away from your usual responsibilities to come here and give us 
the benefit of your expertise.
    And let me just say that we have been trying to conduct 
over the last 20 hearings an open process where we actually 
hear from those who are in industries, and in this case, 
manufacturing, academics, experts, economists, so that we can 
make the best decision as we try to move the issue forward of 
fundamental and comprehensive tax reform, because the fact is, 
our economy is not recovering as quickly as we would like it to 
be.
    We still have unemployment that is far too high, and I 
believe that if we can move the issue of comprehensive tax 
reform, we will see a pro-growth tax policy that is adopted by 
this country that helps us do better here in the United States, 
and also that we can help those companies who are U.S.-based 
doing business around the world.
    As you have all so articulately stated, we are in a global 
economy and we need to make sure that we compete in that way. 
So I just want to, again, thank you for being here on a very 
long day, giving the opportunity for members to get the benefit 
of your experience and advice. And with that, this hearing is 
now adjourned.
    [Whereupon, at 12:40 p.m., the committee was adjourned.]
    [Submissions for the Record follow:]


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