[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                   AMERICAN INGENUITY: PROMOTING INNOVATION 
                            THROUGH THE TAX CODE

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

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON ECONOMIC GROWTH, TAX,
                           AND CAPITAL ACCESS

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                              JUNE 6, 2023

                               __________

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                               
                               

            Small Business Committee Document Number 118-016
             Available via the GPO Website: www.govinfo.gov
             
                              __________

                                
                    U.S. GOVERNMENT PUBLISHING OFFICE                    
52-422                     WASHINGTON : 2023                    
          
-----------------------------------------------------------------------------------     
          
                   HOUSE COMMITTEE ON SMALL BUSINESS

                    ROGER WILLIAMS, Texas, Chairman
                      BLAINE LUETKEMEYER, Missouri
                        PETE STAUBER, Minnesota
                        DAN MEUSER, Pennsylvania
                         BETH VAN DUYNE, Texas
                         MARIA SALAZAR, Florida
                          TRACEY MANN, Kansas
                           JAKE ELLZEY, Texas
                        MARC MOLINARO, New York
                         MARK ALFORD, Missouri
                           ELI CRANE, Arizona
                          AARON BEAN, Florida
                           WESLEY HUNT, Texas
                         NICK LALOTA, New York
               NYDIA VELAZQUEZ, New York, Ranking Member
                          JARED GOLDEN, Maine
                         KWEISI MFUME, Maryland
                        DEAN PHILLIPS, Minnesota
                          GREG LANDSMAN, Ohio
                       MORGAN MCGARVEY, Kentucky
                  MARIE GLUESENKAMP PEREZ, Washington
                       HILLARY SCHOLTEN, Michigan
                        SHRI THANEDAR, Michigan
                          JUDY CHU, California
                         SHARICE DAVIDS, Kansas
                      CHRIS PAPPAS, New Hampshire

                  Ben Johnson, Majority Staff Director
                 Melissa Jung, Minority Staff Director
                            
                            
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Dan Meuser..................................................     1
Hon. Greg Landsman...............................................     3

                               WITNESSES

Ms. Julie Masser Ballay, Vice President and Chief Financial 
  Officer, Sterman Masser Inc., Sacramento, PA...................     8
Mr. Bill Wydra, President, Ashland Technologies Inc., Hegins, PA.    10
Mr. Michael Kaercher, Director of the Climate Tax Project, The 
  Tax Law Center at NYU Law, New York, NY........................    12

                                APPENDIX

Prepared Statements:
    Ms. Julie Masser Ballay, Vice President and Chief Financial 
      Officer, Sterman Masser Inc., Sacramento, PA...............    25
    Mr. Bill Wydra, President, Ashland Technologies Inc., Hegins, 
      PA.........................................................    27
    Mr. Michael Kaercher, Director of the Climate Tax Project, 
      The Tax Law Center at NYU Law, New York, NY................    28
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    Biotechnology Innovation Organization........................    38
    Competitive Carriers Association (CCA).......................    45
    Engine Letter................................................    47
    Nationals Association of Manufacturers.......................    51
    SBE Council - Small Business & Entrepreneurship Council......    56

 
     AMERICAN INGENUITY: PROMOTING INNOVATION THROUGH THE TAX CODE

                              ----------                              


                         TUESDAY, JUNE 6, 2023

              House of Representatives,    
               Committee on Small Business,
                   Subcommittee on Economic Growth,
                                   Tax, and Capital Access,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2360, Rayburn House Office Building, Hon. Daniel Meuser 
[chairman of the Subcommittee] presiding.
    Present: Representatives Meuser, Van Duyne, Williams, and 
Landsman.
    Also Present: Representative Estes.
    Chairman MEUSER. Good morning, everyone.
    I now call the Committee on Small Business to order.
    Without objection, the Chair is authorized to declare a 
recess--let me put my mike on; that might help--of the 
Committee at any time.
    Before we get going, I am going to ask you to stand and say 
the Pledge of Allegiance, please.
    ALL. I pledge allegiance to the Flag of the United States 
of America, and to the Republic for which it stands, one 
nation, under God, indivisible, with liberty and justice for 
all.
    Chairman MEUSER. Thank you.
    Before we begin, I would like to ask unanimous consent to 
waive Mr. Estes from Kansas, from the Ways and Means Committee, 
here to our Committee for the purpose of giving an opening 
statement.
    Without objection, so ordered.
    The Subcommittee is here today to hear testimony on the 
impact of changes to research and development expensing and 
bonus depreciation and the effects they have on small business.
    I will now recognize myself for my opening statement.
    Again, welcome.
    This Subcommittee hearing will be highlighting the 
importance of having a Tax Code that promotes innovation for 
small businesses. Tax Codes are very important for revenue 
growth and to make our American businesses more competitive. 
That is the whole idea. We need to have the most competitive 
small businesses--or, an environment for small businesses in 
the world. That, I believe, is government's role, to create 
that environment for you all to do your thing, as opposed to us 
meddling any further.
    First, though, I do want to thank our witnesses for joining 
us today. Your time here is greatly appreciated by all of us on 
the Subcommittee. And I am very happy, as I just informed the 
Ranking Member, that we have business leaders from 
Pennsylvania's Ninth District who made the trip down. So thank 
you very much.
    Innovation requires risk and, with it, investment in 
research and development. As our witnesses will discuss, 
research and development for small businesses is often more 
difficult due to the issues with capital access and smaller 
workforce that requires a longer time horizon to realize any 
potential possible return on investment. In many circumstances, 
these risks make small-business owners gamble their entire 
company on propositions that may never pay off.
    We need to incentivize this innovation. The American Tax 
Code has provided incentives for businesses to invest into 
research and development. For small businesses that don't have 
endless cash flow and reserves, consistent R&D tax incentives 
are often their only option--``consistent and understood'' 
should be added. These include two different provisions, R&D 
expensing and bonus depreciation, which allow a small business 
to make significant investments they otherwise wouldn't be able 
to make.
    In 2017, the Tax Cuts and Jobs Act took the successful 
bonus depreciation credit to the next level, allowing 100-
percent bonus depreciation for qualifying purchases. This law, 
which was a resounding success on main street, changed 
deductions, depreciation, expensing, tax credits, and other 
items that truly significantly benefited small businesses.
    Unfortunately, the immediate expensing of R&D expired in 
2022, and now small businesses are required to amortize their 
R&D costs over 5 years rather than deducting them immediately. 
For example, take a small business with $1 million in revenue--
and this is interesting--$500,000 in R&D costs, and $500,000 in 
deductible expenses. Under the 2021 tax law, it would have had 
zero profit and its owners would owe no income taxes. But here 
now in 2022, it could deduct only $50,000 in research costs and 
its owners would now pay on $450,000 in income. Significant 
difference.
    Analysis by the Tax Foundation, an independent tax policy 
research organization, found that restoring immediate expensing 
of R&D will benefit both businesses and workers by increasing 
economic output and wages and creating an estimated 20,000 
jobs.
    It would also help build on the broad success of the Tax 
Cuts and Jobs Act. By cutting tax across the board, we saw the 
federal government take in record rates of revenue. This is a 
fact, and the numbers prove it. Thanks to lower rates, overall 
corporate tax revenue surged by 43 percent last year and 
federal revenue jumped 48 percent relative to before the law 
was enacted.
    Additionally, bonus depreciation is set to decrease 20 
percent annually through 2027. Unless Congress acts soon, 
private-sector innovation, especially within the small-business 
economy, will be hamstrung and unable to invest in R&D.
    Although the sunsetting of these provisions has been known 
for several years and even though there is broad, bipartisan 
support for reinstating the expensing option for R&D 
expenditures, Congress, as a whole, continues to hold 
negotiations hostage by insisting unrelated measures be 
included in any legislative remedy.
    I am glad to have Congressman Ron Estes, a distinguished 
Member of the Ways and Means Committee, joining us today to 
discuss his efforts to ensure we continue to incentivize small-
business investment in R&D. Congressman Estes's bill, the 
American Innovation and R&D Competitiveness Act, would 
permanently restore full and immediate R&D expensing for small 
businesses. I am a proud cosponsor of this legislation, which 
has immense bipartisan support, with 93 cosponsors equally 
split among Republicans and Democrats.
    Small businesses are able to fill gaps in innovation that 
larger corporations may miss and are built around fresh 
perspectives and new approaches to everyday challenges, as we 
were just discussing.
    Over 99 percent of business in America are small 
businesses, accounting for 44 percent of all domestic activity 
and two-thirds of jobs in the country. And 70 percent of those 
employed in the Ninth District are employed by a small 
business.
    These roadblocks against America's small business also 
jeopardize our standing on the world stage as the premier 
innovator for tax year 2022. The Organization for Economic 
Cooperation and Development ranked the U.S. 30th out of 36 
based on the strength of our nation's R&D tax incentives--and 
far behind China. For decades, this country has out-innovated 
the world at every turn, and without a strong innovative base, 
we will risk falling further behind dangerous adversaries on 
the world stage.
    Before immediate R&D tax expensing was repealed, China's 
R&D tax incentive was already 2.7 times more generous than the 
U.S. That was before we allowed the R&D tax credit to sunset. 
So, while I have every confidence in the ingenuity of our 
innovators in America, we cannot continue to force our small-
business innovators to compete on a world stage with one hand 
tied behind their back.
    In closing, I ask unanimous consent to insert the following 
letters from the National Association of Manufacturers and the 
Small Business and Entrepreneurship Council for the record.
    Without objection, so ordered.
    Once again, thank you all very much.
    And I will now yield to our distinguished Ranking Member 
from Ohio, Mr. Landsman.
    Mr. LANDSMAN. Thank you, Mr. Chairman, for holding this 
important hearing.
    I agree, American innovation is absolutely key to our 
country's success as a global economic powerhouse. Our standing 
in the world is built on our collective investments in new 
ideas, cutting-edge technology, and competition between talent 
and among our country's best and brightest.
    Our entrepreneurs play a crucial role in the innovation 
ecosystem by attracting investment and bringing ideas from 
university labs to market, advancing our quality of life and 
growing our productive capacity.
    However, as we have heard, these innovative ideas, turning 
them into reality, these businesses need a supportive and 
nurturing Tax Code, among other things. For nearly 7 years, 
section 174 of the Internal Revenue Code has allowed companies 
to write off all of their R&D costs immediately. So that is 
what we are talking about, the ability to write off all of your 
R&D costs immediately.
    Unfortunately, the 2017 tax law upended this long history. 
As a result, starting this year, businesses will be forced to 
claim only 20 percent of their R&D tax benefit every year for 5 
years, instead of all at once in 1 year. In effect, this will 
negatively impact small businesses, particularly many early-
stage startups.
    Right now, our Tax Code is sending mixed signals to our 
country's innovators. On one hand, we invested over $300 
billion for advancing clean energy in the Inflation Reduction 
Act, but, on the other hand, we are stifling this development 
by weakening this tax credit. And to continue this country's 
robust economic recovery, my hope is that this hearing will 
give us the opportunity to bring these tax credits back online.
    And I agree with the Chair that there is bipartisan 
support. But getting it done is another issue, requiring real 
leadership. And I am glad that Congressman Estes is here and 
leading on this. We have to be able to get it to the floor, and 
that does mean saying, ``Hey, it is not going to have 
everything that everybody wants in it, but this particular fix 
needs to get done sooner rather than later.''
    I hear this a lot when I am back in the district and 
talking with small businesses. We have had roundtables. We will 
pop in to a small business, tour. It is a top-three issue for 
them.
    So, with that, I would like to thank all the witnesses for 
joining us. I look forward to their testimony.
    And I yield back.
    Chairman MEUSER. Thank you, Ranking Member Landsman.
    I now recognize the Chair of the full Committee, Mr. Roger 
Williams from Texas, for his opening statement.
    Mr. WILLIAMS. Well, good morning.
    I want to thank the witnesses for being here. Thank you 
very much.
    And I want to thank my friend and colleague, Congressman 
Dan Meuser, for holding today's Small Business Subcommittee on 
Economic Growth, Tax, and Capital Access hearing.
    You know, our nation's small businesses continue to face 
persistently high inflation, interest rates that are being 
raised at the fastest pace since the 1980s--and I remember 
that--a labor shortage that has windows plastered with ``Help 
wanted'' signs across the country, and an increasingly 
uncertain credit environment. With these economic headwinds, it 
is vital that our Tax Code work for our nation's job creators, 
not against them.
    And as a current small-business owner for over 52 years--I 
am a car dealer, I am a car dealer in Texas--I know firsthand 
how a burdensome federal Tax Code can make a small business 
less likely to invest in their own operations.
    Now, the full and immediate expensing provision of the Tax 
Cuts and Jobs Act is the perfect example. Businesses were more 
willing--I can tell you firsthand--more willing to make these 
long-term investments knowing that they could write off the 
full value in the first year. We need to build on successful 
tax policies like this one that will help our small businesses 
invest in their futures.
    And Main Street America is not Republican; it is not 
Democrat. It is Main Street America. And here on the Committee 
on Small Business, we strive to create an environment where 
small businesses can thrive, can grow. And that includes 
commonsense initiatives that encourage entrepreneurial risk-
taking, because risk and reward is what built our country.
    Now, with that, I am looking forward to today's discussion.
    And, Mr. Chairman, I ask for unanimous consent to insert 
the following letters for the record: letters from the 
Competitive Carriers Association; Engine, signed by 66 startups 
and innovators; and the Biotechnology Innovation Organization.
    So thank you, Mr. Chairman, and I yield my time back.
    Chairman MEUSER. Without objection, so ordered.
    Chairman Williams yields back his time, and we thank you 
very much, Chairman Williams.
    I now recognize Mr. Estes, the sponsor of H.R. 2673, the 
American Innovation and R&D Competitiveness Act of 2023, for 
his opening statement.
    Mr. ESTES. Well, thank you, Chairman Meuser and Ranking 
Member Landsman and Chairman Williams and all of the Members of 
the Small Business Committee, for allowing me to testify today 
on this critical, bipartisan bill that impacts all of our 
districts, the American Innovation and R&D Competitiveness Act.
    On tax day this year, I reintroduced this commonsense bill 
with my colleague John Larson, along with Representatives 
LaHood, DelBene, Arrington, Panetta, and 56 additional original 
cosponsors. The bill will continue to gain support--or, has 
continued to gain support and has nearly 100 cosponsors today, 
evenly split between Republican and Democrat.
    The bill is straightforward. It corrects a tax issue 
businesses face when conducting research and development. The 
American Innovation and R&D Competitiveness Act allows for 
immediate expensing of eligible R&D expenses, bringing us back 
to where we were just a few years ago and securing American 
dominance in research and development.
    Full expensing for R&D was allowed through the end of 2021. 
However, since the beginning of 2022, businesses have been 
required to spread out, or amortize, the R&D expenses over 5 
years for domestic R&D and over 15 years for foreign R&D.
    Rather than extend the immediate expensing for only a few 
years, this is a permanent solution in this bill that provides 
clarity and stability for innovators, businesses, and workers. 
And the legislation will certainly help small businesses here 
in the United States and encourage economic development.
    In fact, the Association of Equipment Manufacturers said 
the bill offers a much-needed boost for the equipment 
manufacturing industry at a time when America faces adverse 
inflation and strained supply chains.
    AEM isn't the only organization praising the bill. The 
National Taxpayers Union featured this legislation on their 
``No-Brainer'' list in 2020. The list is a collection of 10 
bills that NTU deems as no-brainer bills that have bipartisan 
support and should easily pass in Congress. However, they only 
recognize bills once, but they did include this legislation as 
an honorable mention in the following year and sent letters of 
support to Members of the House Ways and Means Committee in 
this Congress.
    The Aerospace Industries Association, Semiconductor 
Industry Association, Plastics Industry Association, 
Information Technology Industry Council, and National 
Association of Manufacturers have written op-eds and issued 
statements of support. They all know: Where R&D occurs, jobs 
and economic opportunities also follow.
    And this isn't just about major corporations. R&D supports 
businesses of all sizes. According to the R&D Coalition, about 
15 percent of private U.S. R&D investments are made by small 
businesses with fewer than 500 employees. And, to some degree, 
that has a major--a more outline of impact than it does for 
larger businesses.
    Right now, the United States is lagging behind in R&D, a 
trend that has been happening for a while. According to the R&D 
Coalition, the United States' share of global R&D investment in 
2019 was 30 percent, down from 40 percent in 1999.
    Unlike the United States, China's global share of R&D 
investment has gone up. It was 24 percent in 2019, a big jump 
from just 5 percent in the year 2000. That means China's R&D 
investment has increased by 400 percent in just two decades.
    And here is how they changed the direction of their R&D 
presence. China has implemented a deduction of up to 200 
percent of the eligible R&D investments. That is the equivalent 
of 10 times the amount the current U.S. Tax Code allows.
    Without an incentive for homegrown R&D, the United States 
also loses out on creating new jobs. The R&D Coalition says, 
for every $1 billion in U.S. R&D spending, 17,000 jobs, earning 
$1.4 billion, are supported in the United States.
    They also note that, unless the R&D amortization policy is 
reversed, the United States stands to lose 410,000 jobs, $57.5 
billion in labor income, and $71 billion in R&D spending over 
the next 10 years.
    The American Innovation and R&D Competitiveness Act is the 
right solution to help small businesses in our districts, from 
Kansas to Texas, to New York, to Pennsylvania and everywhere 
else that could benefit from jobs, opportunities, and economic 
growth.
    As a former Member of this Committee, I know you all have a 
vested interest in supporting the small businesses that are 
economic engines for our country, and I hope you will consider 
joining me as cosponsors.
    Today's research-and-development dollars creates tomorrow's 
jobs. And we need to keep R&D dollars inside our country, where 
they can help strengthen American businesses and workers.
    I want to thank my friend from Connecticut, Congressman 
Larson. We have worked over multiple Congresses to make this 
legislation a reality. And now that American companies have had 
a year without immediate expensing, I am cautiously optimistic 
that this is the year that that commonsense bill will become 
law.
    Thank you again for allowing me to testify today, and I 
yield back.
    Chairman MEUSER. Mr. Estes, we thank you for participating 
in this hearing with us and for this important bill.
    We will now proceed with witness introductions.
    So it is my pleasure to introduce first our first witness, 
Ms. Julie Masser Ballay.
    Ms. Masser Ballay is the chief financial officer and vice 
president of Sterman Masser, Incorporated, located in 
Sacramento, Pennsylvania--the original Sacramento--which is 
right in the heart of my district, in Schuylkill County.
    After working for Weyerhaeuser as a structural frame 
engineer for 6 years, Ms. Masser Ballay rejoined her family 
business in her current position in 2009, where she oversees 
finances, technologies, and engineering for the business. 
Today, Sterman Masser employs approximately 300 people in a 
variety of positions and distributes over 250 million pounds of 
potatoes each year.
    In addition to working for her family business, she gives 
her time to a number of industry groups, including the Food and 
Vegetable Industry Advisory Committee for the USDA, and serves 
her community on the board of the Hegins-Hubley Authority and 
in many other capacities that I am familiar with.
    Ms. Masser Ballay is a graduate of the great Penn State 
University, where she received her Bachelor of Science and 
Master of Science in Agriculture and Biological Engineering, as 
well as a Master of Business Administration.
    Ms. Masser Ballay, thank you very much for being here, and 
we look forward to our conversation and your testimony.
    Our next witness today is Mr. Bill Wydra. Mr. Wydra is the 
founder and president of Ashland Technologies, Incorporated, 
located in beautiful Hegins, Pennsylvania, also in Schuylkill 
County.
    Founded in 1996 by Mr. Wydra, Ashland Technologies has over 
25 years of experience servicing many industries and has 
expanded to become a one-stop shop for various manufacturing 
needs, including everything from roller-coasters--which I have 
seen, not ridden on, but seen--to vending machines.
    In 2009, Ashland Technologies was ranked as the fastest-
growing manufacturer in Pennsylvania and was 55th in the 
country--a truly impressive feat for which we definitely 
applaud Mr. Wydra.
    With 4 plants and over 30 employees in total, Mr. Wydra 
uses his expertise in marketing to find new customers and 
optimize their manufacturing process to best fit the needs of 
their customers.
    Mr. Wydra is a graduate of George Mason University with a 
bachelor's degree in marketing, economics, and finance.
    Last year, Mr. Wydra joined myself and Vice Chairman 
Luetkemeyer for a small-business roundtable here in Washington, 
which we appreciated. And we want to thank him again for coming 
here then and today to testify on what is a very important 
topic.
    I now recognize the Ranking Member, Mr. Landsman, to 
introduce the minority witness for today's hearing.
    Mr. LANDSMAN. Thank you, Mr. Chair.
    Michael Kaercher is a senior attorney advisor and director 
of the Climate Tax Project at the Tax Law Center at NYU Law. He 
has over a decade of experience on a broad range of complex 
federal tax issues. He is currently focusing on the Tax Law 
Center's work on the implementation of the climate tax 
provisions of the Inflation Reduction Act and contributes to 
the Center's work across a range of other issue areas.
    Prior to joining the Tax Law Center, Mr. Kaercher spent 
several years on detail to the House Ways and Means majority 
tax staff. While there, he designed and advanced tax policy in 
various ways, including green-energy tax policy, excise taxes, 
and COVID relief.
    For 7 years, Mr. Kaercher served at the Office of Associate 
Chief Counsel (International) at the Internal Revenue Service, 
where he advised them on interpretation, administration, and 
enforcement of various international tax agreements.
    Mr. Kaercher holds a J.D. from Harvard Law School and a 
B.A. from Colgate University and is admitted to practice law in 
Washington, D.C., and Maryland.
    Welcome.
    Chairman MEUSER. I thank the Ranking Member.
    And, again, I appreciate all of you being here today.
    Before recognizing the witnesses, I would like to remind 
you all that your oral testimony is restricted to 5 minutes in 
length. If you do see the red light turn on in front of you, it 
means your 5 minutes have concluded, and you should wrap up 
your testimony.
    I now recognize Ms. Julie Masser Ballay for her 5-minute 
opening remarks.

  STATEMENTS OF JULIE MASSER BALLAY, VICE PRESIDENT AND CHIEF 
FINANCIAL OFFICER, STERMAN MASSER INC.; BILL WYDRA, PRESIDENT, 
  ASHLAND TECHNOLOGIES; AND MICHAEL KAERCHER, DIRECTOR OF THE 
 CLIMATE TAX PROJECT, THE TAX LAW CENTER AT NYU LAW, ON BEHALF 
                OF THE TAX LAW CENTER AT NYU LAW

                STATEMENT OF JULIE MASSER BALLAY

    Ms. MASSER BALLAY. Thank you, Chairman Meuser. And good 
morning. Thank you, Chairman Williams, Representative Estes, 
and distinguished Members of the Small Business Committee. I 
appreciate the opportunity to give testimony today.
    As Chairman Meuser stated, my name is Julie Masser Ballay, 
and I am CFO and vice president of Sterman Masser, Inc., here 
on behalf of our companies, Sterman Masser, Inc., Masser 
Logistic Services, Keystone Potato Products, and Lykens Valley 
Grain, with headquarters located in Sacramento, Pennsylvania.
    For more than 50 years, Sterman Masser, Inc., has been a 
potato grower, packer, and shipper of potatoes. We are a family 
business, started by my grandfather, Sterman, in 1970, and now 
owned by my parents, Keith and Helen Masser; my brother, David 
Masser; and me. Dave and I are eighth-generation farmers, and 
we have high hopes that one or more of our children will become 
the ninth generation.
    We currently are farming approximately 1,000 acres of 
potatoes, along with 2,300 acres of corn, 1,500 acres of 
soybeans, 850 acres of wheat, with the remaining acreage 
dedicated to a variety of cover and rotation crops, totaling 
over 6,000 acres in production.
    As the Congressman stated, we are distributing retail 
packed potatoes, mainly, throughout the Eastern Seaboard and 
have farming, packing, distribution operations supported by our 
team, with an updated number of almost 400 employees at this 
point.
    The year 2020 marked our 50th year in business as well as 
the start of the pandemic. Our business is focused on feeding 
people, and that did not stop during the pandemic. Our doors 
stayed open, and our workforce showed up. On behalf of the 
Masser family, I would like to give our heartfelt thanks to our 
employees that helped keep food on the table of families in 
America.
    But like any other company, we had to adjust our way of 
doing business in recent years. One of those adjustments was 
increasing the automation in our packing operation to 
transition difficult-to-fill, labor-intensive positions into 
machine-operator positions by mechanizing our bag-filling and 
palletizing functions within our packing shed. These steps in 
automation improved employee safety by reducing the risk of 
sprains and strains, while also improving production 
efficiency.
    We started the process of automation prior to 2020, and 
with the assistance of bonus depreciation and the positive 
impact that had on our company's cash flow, we were able to 
continue installing this machinery throughout the pandemic.
    This example demonstrates what I believe to be an important 
impact of bonus depreciation for a company like ours, which is 
the ability to reinvest in our family business with improved 
cash flow. Reinvesting helps us increase the speed of our 
innovation and help make necessary investments that allow us to 
stay up to date with technology and keep pace in the 
marketplace.
    By taking advantage of bonus depreciation, we have been 
able to redirect cash back into our business so that we can 
improve employees' work environment, increase our efficiency, 
and continue to remain competitive in the marketplace, 
particularly as we combat tighter margins through this 
inflationary period.
    As a family business, the concern always exists that we 
will not be able to keep pace with larger companies or with 
rising costs while still addressing the needs of our employees.
    With a tight labor market in our region, we are always 
looking for ways to improve the work environment for our 
employees, improving safety and efficiency. Innovation allows 
us to be in a position to compete for employees and create 
higher-paying positions.
    Additionally, with interest rates on the rise, smaller 
businesses are able to benefit by utilizing cash instead of 
locking in loans with high rates. Although our business is 
fortunate to have a very good banking relationship, small 
companies, in general, do not have the ability to negotiate 
with banks as well as large corporations.
    This is where the SBA is able to step in to offer 
assistance with small-business loans. But the ability to 
utilize cash to reinvest in your own business is another useful 
tool that a business owner can have in their tool belt.
    Small and family-owned businesses are the backbone of the 
American economy. In order to remain competitive, particularly 
in the agricultural sector, we need to be able to keep up with 
the speed of innovation of larger corporations. Taking 
advantage of bonus depreciation and using that to reinvest into 
our business assists us in accomplishing this so that we can 
continue to provide a good work environment for our employees 
and put food on the tables of families in America.
    Thank you again for the opportunity to take part in today's 
discussion. I appreciate the interest from the Subcommittee.
    Chairman MEUSER. Thank you. Thank you very much, Ms. Julie 
Masser Ballay, for your opening remarks.
    We now recognize Mr. Bill Wydra for your 5-minute opening 
remarks.

                    STATEMENT OF BILL WYDRA

    Mr. WYDRA. Good morning.
    And thank each and every one of you for further advancing 
my belief in the American way. The fact that we are all sitting 
here having this particular subject discussed is very important 
to us. And, again, it just reinforces that for me, that you 
care.
    You know, a lot of times when you are on the front line, 
you think you are fighting the battle all by yourself, but 
meetings like this and the fact you have taken the time to 
organize this and want to hear from us--and genuinely want to 
hear from us--that goes a long way in helping us want to grow 
this company and grow this country even further.
    So thank you, each and every one of you.
    I had a lifelong, you know, entrepreneurial spirit, 
starting my first bicycle repair business at the age of 5 and 
growing that into a wide variety of things, which you have 
heard a little bit about. We design and build roller-coasters 
and manufacture those in both Florida and Pennsylvania. We have 
amusement attraction development, including virtual reality. We 
have unique food concepts, such as Honolulu Hotdog. We even 
have developed ice cream vending machines, as Congressman 
Meuser has mentioned.
    At the backbone of all this is an enterprise which is one 
of the mid-Atlantic region's most complete contract metals 
manufacturing companies. We do CNC machining, welding, 
fabricating, powdercoating, assembly, testing, engineering--all 
under one roof. Very, very innovative for a small manufacturing 
company. Very, very innovative in our industry.
    There are very, very few out there that can do all of those 
things under one roof. That comes with a lot of trial, it comes 
with a lot of tribulation, it comes with a lot of failures. So 
these programs that you have in place allow us to do that and 
create that competitive advantage for ourselves.
    These companies have won many innovation awards. We have 
won five Brass Ring Awards for new product development in the 
amusement industry. As a new company, that almost never 
happens. To get five has been unprecedented. So it is this 
culture of innovation that has really driven that for us.
    We have been awarded the Manufacturing Innovation Award by 
the Manufacturing Resource Center. We have been in the Top Ten 
Machine Shops; earned 5 straight years on the Inc. 500 List of 
private companies, as you have heard.
    At the core of this, it really boils down to the talented 
teams. You know, me sitting here, I am only representing them, 
okay? This is all about the people that we employ, and it is 
all about giving them that inspiration for developing something 
new.
    We were talking about it before. You know, somebody that 
works all day just pressing a button, not even sure what they 
are developing, they don't have inspiration, they don't have 
excitement, they are not interested in their work. But you give 
them the opportunity to innovate and create something new and 
go home and tell their kids what they have been working on, 
that makes a difference in our households. And that is very, 
very important.
    You know, we truly believe that, you know, our success is 
going to be determined by as much as we endeavor to anticipate 
the future needs of our customers and proactively deliver 
unique solutions to their emerging challenges. And that can 
only be gained through research and development.
    You know, there is an incredible rush that comes with this. 
You know, creating something new and seeing it come to life, 
like being able to design a roller-coaster on a piece of paper, 
sometimes on napkins, and then be able to go ride that with 
your 8-year-old daughter and say, ``We did this''? Wow. I mean, 
it brings a tear to my eye right now just thinking about that.
    That is what we are talking about here today. We are not 
talking about laws; we are not talking about this. We are 
talking being able to inspire people, inspire growth, inspire 
our country to move forward.
    And I only pray that, you know, really, I can transfer that 
spirit to my kids. You know, I have four kids, and, you know, 
they are cluttered with so many things now, you know, with all 
the internet. And everyone knows those complaints. We are not 
here to talk about that today. But being able to get them in 
programs--you know, I was talking earlier, I had a little disk 
that I brought in case I needed to transfer my testimony to 
something. The only other thing on that disk was, my 13-year-
old daughter, at the time, she created her own business card 
for a collapsible pencil that she wanted to make a bracelet out 
of. Like, that is the type of thing that we need to be 
inspiring in our kids. And that is truly where we are with this 
program.
    So, you know, everyone has already talked about, you know, 
what this is going to do to cash flow, and I will tell you 
right now: It will kill it. You know, if you don't figure out a 
way to get this advanced and we get rid of this amortization 
program, it will kill innovation. Because not only are we 
dealing with all the problems you have already talked about, we 
have, you know, the fact that we might do away with bonus 
depreciation. It will put the most significant cash-flow crunch 
on our businesses.
    So, not only does innovation go away, employee development 
programs go away, training goes away, you know. And training 
can really inspire people as well. You know, once you give them 
the confidence that they know the language, they know what they 
are doing, they know what they want to talk about, the ideas 
that start flowing from them are just unbelievable.
    So the timing is bad right now. We have all already talked 
about that.
    So, with my 15 seconds, I just want to close with this. I 
would like to quote Walt Disney. You know, when you are in the 
amusement industry, you have to do that. ``It is kind of fun to 
do the impossible.'' And that is what we are talking about here 
today.
    So continue with this path. Thank you, Congressman Estes, 
for pushing this. And that will maintain the spirit of 
innovation.
    Chairman MEUSER. Well, thank you, Mr. Wydra. That was 
excellent.
    Now we recognize Mr. Michael Kaercher for your 5-minute 
opening remarks.

                 STATEMENT OF MICHAEL KAERCHER

    Mr. KAERCHER. Chairman Meuser, Chairman Williams, Mr. 
Estes, and distinguished Members of this Committee, thank you 
for the opportunity to testify today.
    Tax policy can support investment in innovative activities 
through targeted tax credits, deductions, and other tax breaks. 
It can lift up children, who are the future innovators, 
entrepreneurs, and workers needed for a dynamic economy. And it 
can raise revenue to fund investments outside the tax system, 
including federal research grants for small-business 
innovation.
    The 117th Congress enacted tax benefits intended to spur 
innovation and created new tools to give small and startup 
businesses access to those tax benefits. The bipartisan CHIPS 
and Science Act, the Bipartisan Infrastructure Law, and the 
Inflation Reduction Act created major new tax credits for 
investment in domestic manufacturing and equipment and for 
innovation across the energy sector.
    For example, one of the IRA's tax credits for advanced 
manufacturing invests $10 billion in projects with high 
potential for innovation and commercialization. And starting in 
2025, the law transitions to a tech-neutral regime intended to 
spur innovations in producing zero-emissions electricity and 
fuels.
    Most tax benefits, including credits and deductions, can 
reduce income tax owed by a small business, but many small 
businesses, and especially startup small businesses, have 
limited or no tax liability. Both the CHIPS Act and the IRA 
create new ways of giving smaller and startup businesses better 
access to tax breaks for investment in innovation, such as the 
ability to transfer certain tax credits or to receive others 
paid out as refunds.
    The 117th Congress also temporarily expanded the Child Tax 
Credit, which is an investment in the future innovators, 
entrepreneurs, and workers needed for a dynamic and innovative 
economy. Research shows that such credits make children 
likelier to grow up healthier and do better in school, which, 
in turn, delivers long-run benefits for workplaces, 
communities, and the economy.
    Researchers find that America is losing out on having more 
innovators who are women, people of color, or from low-income 
families because children with equal talent and potential are 
growing up in households that are too poor or not connected 
enough to become innovators and entrepreneurs. Tax policy that 
reduces child poverty and increases opportunity, like a fully 
refundable Child Tax Credit, can help unlock that potential.
    The tax system also supports innovation in small business 
by raising revenues to fund investments outside of the tax 
system, including federal R&D grants for small business 
innovation. So it is unfortunate that the deal to avert U.S. 
default cuts parts of the budget that funds these programs.
    That same deal also cut IRS funding. This will hurt honest 
small businesses. The IRS won't be able to do as much to 
transform service for small businesses who want clear and 
timely help understanding and meeting their tax obligations. 
More unscrupulous businesses will continue to have unfair 
competitive advantage by avoiding or evading the taxes they 
owe.
    To close, let me note that the TCJA prioritized large, 
corporate, permanent rate cuts over investing in future workers 
and innovation. It paid for corporate tax rates in part by 
requiring deductions for certain research expenses to be taken 
over time rather than deducted immediately.
    But some lawmakers are proposing reversing nearly all 
scheduled revenue-raising provisions of the 2017 law. That 
would lead to a combination of tax subsidies that aren't well-
targeted to small businesses or innovation.
    Under that proposal, certain businesses would be able to 
claim deductions for investments but also would be able to 
fully deduct the cost of that interest. That set of tax 
subsidies would be especially valuable for the leveraged buyout 
industry as well as for large, multinational corporations that 
avoid taxes by making large interest payments to their foreign 
affiliates.
    Going forward, small-business innovation will be best 
served by tax policy that does four things:
    First, the tax system can use well-targeted tools to 
efficiently reach small and innovative businesses and give them 
the level of service they deserve from the IRS.
    Second, the tax system can invest in future workers and 
innovators through measures like an expanded fully refundable 
CTC.
    Third, the tax system can eliminate unfair competitive 
advantages that large tax evaders and avoiders currently enjoy 
over honest small businesses.
    And, fourth, the tax system can raise revenue to fund 
public R&D and private innovation.
    Thank you for inviting me to testify today, and I would be 
glad to take any questions.
    Chairman MEUSER. The gentleman yields back. We appreciate 
your testimony very much.
    We will now move to the Member questions under the 5-minute 
rule. And I am going to recognize myself for 5 minutes.
    So, Mr. Wydra, I am going to start with you.
    So this Committee is, of course, Economic Growth, Taxes, 
and Access to Capital. We are about oversight of the SBA, but 
we are the advocates for small business in Congress. So, as you 
stated, this is a very important issue for us and one that we 
need to overcome, as far as the R&D tax credit issue and bonus 
depreciation.
    I was in small business, into a large business, for almost 
25 years. I have spent a lot of time visiting small businesses. 
And it is really not a pretty picture, for the most part--and I 
visited both of your companies--between inflation; workforce 
unavailability, which means longer hours for you and others; 
supply-chain issues; wages, which is normally a good thing but, 
you know, not when they go up incredibly rapidly and you lose 
people faster; and such. Dealing with, now, tax increases is--
the threat thereof, as well, that we see--is very difficult. 
And many are selling more but making less and, of course, as 
stated, working more hours.
    So the questions are: With the type of R&D reduction, bonus 
depreciation reduction, the threat that we hear of the 20-
percent small-business income deduction, what is that doing to 
your business, Mr. Wydra? Is it affecting your expansion? Is it 
affecting your hiring? Is it affecting your CapEx? Is it 
mitigating your willingness to take a risk on some new 
innovations? Tell us about that.
    Mr. WYDRA. Yeah. All of the above.
    You know, I think it changes your mental state, you know, I 
think is the first thing that it changes. You know, you have 
got one thing; maybe you could deal with that. You have got 
another thing; well, okay, now we come up with a solution for 
that. All of these things are compounding at the exact same 
time. This is just an awful time to consider, you know, going 
forward with the implementation of amortizing those expenses 
over 5 years.
    It is that little bit of extra cash flow that is going into 
employee development programs. It is helping them gain the 
confidence that they need to be innovators, you know? And I 
think that is one of the first things that begins to go away, 
because is it necessary? No. We could still push a button 
today. You know, we are moving into some automation; we could 
still do those kinds of things today. So what we are doing by 
not doing this, we are robbing from the future.
    So, yeah, we can get through today. You know, companies are 
going into survival mode. They are failing to do the right 
things----
    Chairman MEUSER. Yeah.
    Mr. WYDRA.--because they are looking at this being 
implemented. And that is why people are starting to think 
differently and act differently.
    Chairman MEUSER. Okay.
    Interest rates and access to capital. You mentioned cash 
flow.
    Mr. WYDRA. Oh, it is awful.
    Chairman MEUSER. That is one of the most important parts of 
any business, particularly small business.
    Mr. WYDRA. Yep.
    Chairman MEUSER. So how is your banking?
    Mr. WYDRA. And it is really rough. It is really rough in 
manufacturing. So, you know, we have a double whammy here. You 
know, number one, if this comes back, we are going to be 
shorter on cash than we would have been otherwise. And if the 
bonus depreciation goes away, we can no longer now, you know, 
really expand that additional capital into investing.
    You know, so with interest rates where they are right now, 
it is very difficult, you know, to look at doing that type of 
expansion even if you can get it. We have a very good banking 
relationship with Mid Penn, you know, the local regional bank, 
very good relationship. But the problem is, you know, do we 
want to? You know, it is very expensive.
    So now we are looking at more innovative ways to utilize 
some of the equipment that we already have. But, now, if that 
goes away, well, now, you know, we can no longer even afford to 
do that.
    So I think it is the compounding of those two issues that 
really, really, really makes it difficult, and the timing----
    Chairman MEUSER. Thanks.
    Ms. Masser Ballay, you have a farm, a family business in 
between a large and small. You mentioned about speed of 
innovation, the importance there.
    Can you expand upon what Mr. Wydra is saying and how some 
of these new factors, particularly taxes, R&D, and bonus 
depreciation, would negatively affect you?
    Ms. MASSER BALLAY. Sure.
    And I think, from our perspective, since we are really 
using the research and development of other companies to 
implement automation, it creates even a greater lag time, 
right? So, you know, they are not able to have the speed of 
innovation because they are being impacted, you know, with 
this. So then, for us, in terms of the lead time for equipment 
that we are purchasing and installing, then that would extend 
it for us as well.
    You know, it is about having that access to capital. With 
the interest rates going up, to Mr. Wydra's point, you know, 
yes, we have a good banking relationship, but do we want to put 
in place these high-interest loans right now? Having access to 
that capital and being able to work that with your cash flow is 
a better option in these types of inflationary times.
    So it really is about speed, and, from our perspective, 
with the workforce challenges that we can face, we are 
competing outside of our industry where we are at in central 
Pennsylvania. We are nestled right in between the 81/78 
corridor. There are a lot of warehouses, with a variety of 
different industries going in there. And we are all competing 
for the same people. So our wage rates are keeping up with 
these other industries, as opposed to keeping up with 
agricultural industries.
    So, with that, you know, with trying to make a better work 
environment for our employees----
    Chairman MEUSER. Thank you.
    Ms. MASSER BALLAY.--to keep them satisfied--yeah.
    Chairman MEUSER. Thank you. Yeah, we need to give 
advantages to American food, American roller-coasters, and not 
give the advantage to China.
    So thank you. I am over time. My apologies to the 
Committee. I now yield to the Ranking Member for his 5 minutes 
of questions.
    Mr. LANDSMAN. Thank you.
    I guess this is first to you, Mr. Kaercher, but, you know, 
happy for others to weigh in.
    I really liked the way in which the bill to deal with the 
R&D question is a no-brainer. And I suspect there are a few 
other no-brainers as it relates to the Tax Code and supporting 
small businesses.
    And so I am wondering if you have strong feelings about 
what other sort of changes Congress should pursue to help small 
business, particularly now, as it relates to, you know, the big 
barriers for small business.
    I mean, one is obviously the cost of capital. That is one 
of the things that we take on in this Subcommittee, and 
interest rates in particular. Workforce-related issues. I am 
curious, what are a few other, you know, no-brainers that you 
would want us to lift up?
    Mr. KAERCHER. Thank you for the question.
    So I think that you should--I would think about this in 
terms of tradeoffs, right? What kind of activity are you trying 
to support? And what are sort of the problems that you are 
trying to solve? And how much does it cost? Right?
    If you want to sort of make sure that small businesses are 
getting full access to innovation subsidies and credits and 
that sort of thing, that leads you down one sort of path.
    If you want to sort of provide a more level playing field 
for small businesses, where you think that that is not 
currently in effect, that is a different kind of path.
    And if you want to work on workforce development, that is a 
totally separate sort of direction.
    So it really depends on what you want to prioritize and 
then, ultimately, how to pay for it. So I think those are the 
ways that I would think about how to think about that problem.
    Mr. LANDSMAN. Thank you.
    And I would love to hear--but if you had to pick one, if 
you had to go down one path, what path do you go down and what 
change do we make?
    Mr. KAERCHER. Yeah, I think one really historic change is 
the adoption of the global tax deal. That is a provision that 
would ensure that large multinationals pay sort of a set rate 
of tax, at least 15 percent.
    And for the small-business community, of course, this helps 
level the playing field, because they don't have the ability to 
sort of shift profits overseas to low-tax jurisdictions.
    Mr. LANDSMAN. Yeah.
    Mr. KAERCHER. And so that is a disadvantage that they have 
in the current system.
    Mr. LANDSMAN. Thank you.
    Mr. WYDRA. So I was just going to say, you know, obviously, 
I don't know all of the Tax Code, but, you know, these two 
things, to me, make sense as the tip of the spear.
    You know, you innovate, you grow, you develop a new 
product, and you hire people. Then you need to train those 
people. So, you know, it creates the catalyst for growth faster 
than anything else. So, if we can support innovation, however 
that is, then that is the thing that we should be working on.
    Secondarily is the buildings and the expansion that goes 
with that. So that is cost of capital; it is the bonus 
depreciation. Those two things literally are the leading 
mechanisms for growth. I cannot think of another thing that 
would be in advance of that or, you know, furthering our cause 
as a country better than those two.
    Ms. MASSER BALLAY. And just to add to that, I think that 
goes to the speed. When you have those two things in place and 
you are able to now take advantage of that increase of cash 
flow, you can now implement the speed and continue to grow much 
faster--much faster and really keep up with competitors. A lot 
of this is all about competition and making sure that everybody 
can keep pace.
    Mr. LANDSMAN. Thank you.
    Last question: My understanding was that, in talking to 
small businesses back home, one of the biggest issues--the R&D 
piece comes up a lot, but the other big issue, outside of just, 
you know, workforce-related issues, is the issue of interest 
payments.
    I mean, the interest rates--and it has been mentioned 
here--have really crushed a lot of small businesses in terms of 
their ability to access affordable capital and then be able to 
pay all their bills every month.
    So I am curious, Mr. Kaercher, do you see this as a big 
issue? If so, is there a Tax Code solution here?
    You know, my understanding was, for years, you know, small 
businesses could write that off, their interest payments. That 
is no longer the case.
    Is this a big issue? If so, is it, you know, up to Congress 
to solve?
    Mr. KAERCHER. This is another question of tradeoffs, right? 
In the 2017 bill, one of the tradeoffs was reducing the 
corporate rate, paid for in part by limiting the ability to 
deduct these interest payments. That is something that 
policymakers can certainly consider unwinding.
    But it sort of leads to some of the same tradeoffs as we 
have talked about before: Is this the most important way to 
spend the money? The most productive way to spend the money? 
And how do you pay for it?
    Chairman MEUSER. Thank you.
    The gentleman's time has expired.
    We now will recognize Ms. Van Duyne from Texas for 5 
minutes.
    Ms. VAN DUYNE. Excellent. Thank you very much, Mr. 
Chairman.
    In 2017, the previous administration, as you know, as we 
have been discussing, enacted the Tax Cuts and Jobs Act. And 
this comprehensive tax reform not only stimulated economic 
growth but also generated record revenues, while significantly 
reducing taxes for individuals and for businesses across the 
board.
    Under TCJA, tax revenues outpaced CBO projections and 
reached record highs. In the first 2 years after TCJA, GDP 
growth was a full percentage point higher than CBO's pre-TCJA 
forecast. And prior to TCJA, the growth rate of business R&D 
investment had averaged only 4.5 percent over 5 years. However, 
with TCJA in effect, companies were provided with enhanced 
incentives to invest in R&D, leading to increased innovation 
and technological advancement. And this led to an increase, 
now, instead of just being 4.5 percent, to 18 percent.
    However, as we know, these are being expired. Companies are 
now required to deduct R&D costs over a period of 5 years. So, 
as a result, the reduced deductions have led to increased 
taxable income and a higher tax bill for companies. To manage 
their cash flow, larger companies have resorted to borrowing 
more, while smaller companies have experienced a slowdown in 
their growth due to the impact of these changes.
    Which is why I am very proud to be able to join my 
colleague, Mr. Estes, in introducing legislation to extend 
these provisions. We have been going across the country in some 
of our Ways and Means field hearings, and what we have heard 
from literally every area of the country in every industry is: 
This R&D tax credit will be very disruptive and will harm, hurt 
their ideas of innovation.
    So I am going to ask Mr. Wydra: Before TCJA, the U.S. was 
uncompetitive globally when it came to corporate and small-
business taxes. Now, with the current R&D tax provisions being 
expired, where does that put us on the world stage?
    Mr. WYDRA. You know, two steps forward, nine steps back, 
you know, is exactly what is happening here.
    You know, you are inspiring this growth, you know--you are 
making decisions in policy here that guides our decisions, you 
know, and it is a great responsibility that you have to guide 
that.
    And I think you have said, ``Green-light innovation. Let's 
be innovators. Let's do this.'' And now we are saying, ``Well, 
now let's put the brakes on it.''
    And, again, I think everyone is kind of surprised that that 
was in there--you know, like, even us. It is like, oh, wow, we 
didn't think about that, or we didn't think that this was going 
to come to a point that we would have to start amortizing that 
and really calculate that into our plans.
    But, you know, without a nice runway--to say, ``Okay, here 
is a nice, well-lit runway, a clear path; there is no 
disruption to this; go,'' you can unleash one of the greatest 
periods of innovation in the world just with this decision.
    And, again, I think that is why I am here. That is why we 
are trying to take the time out.
    And it is all about--you know, really, again, it is all 
about--for me, it is all about our employees. It is all about 
our teams. It is all about giving them the spirit of innovation 
and just letting them loose.
    And if you can do that with all the small businesses and 
even the large businesses, you are going to have unprecedented 
growth on your hands.
    Ms. VAN DUYNE. Thank you, Mr. Wydra.
    Ms. Ballay, what do you think, on global competitiveness, 
that getting rid of these tax incentives, the TCJA and our 
Innovation in America, will do to us long-term in being able to 
compete globally?
    Ms. MASSER BALLAY. Yes, I think it slows down how quickly 
we can implement, you know, business strategies, whereas in 
other jurisdictions they are not being hampered quite as much.
    And that, you know, slowing down really impacts our ability 
to plan. You know, I think Mr. Wydra touched on it, you know, 
which is that we want to be able to plan out our expansions. 
You know, we are looking at, you know, 1, 2, 3, 4, 5 years out. 
We really want to plan out those expansions. And if it is 
uncertain what our access to capital is going to be, what our 
access to the cash flow is, what our tax liabilities are going 
to be, our ability to plan out is hampered. And so then that 
slows down our ability to compete on the local scale, on the 
regional scale, and also then on the global scale.
    Ms. VAN DUYNE. All right.
    Do you have any thoughts on our global competitiveness and 
what this does to us around the world from an R&D tax credit 
perspective?
    Mr. KAERCHER. Thank you for the question.
    I think the, sort of, evidence on the impact of expensing, 
from the research, is somewhat mixed for a couple of reasons. 
Large companies, multinationals, often focus more on book 
profits than tax, and so the level of incentive effect there is 
a little bit unclear.
    For small businesses, it does seem to have a larger effect, 
and that is very important. But many small and startup 
businesses, as I mentioned in the testimony, don't have the tax 
liability to actually access expensing. So that is just sort of 
a tradeoff in the policy.
    Ms. VAN DUYNE. No, and I understand--oh, oops, I am 
actually out of time. So thank you very much.
    I yield back.
    Chairman MEUSER. The gentlelady's time has expired and 
yields back.
    I now recognize Mr. Williams of Texas for 5 minutes.
    Mr. WILLIAMS. Thank you, Chairman.
    In full disclosure, I love profits. I like to make money--
and pay taxes, if I make money. But let me just say this: 
``Profit'' is not a dirty word. It is a dirty word to the 
government, okay? They don't understand small business.
    You touched on competition. Competition drives everything. 
Competition tells you if you are doing a good job. Competition 
tells you if you are doing a bad job. If your prices are 
competitive, it tells you. Okay? We need to create more 
competition.
    The greatest asset we have is small business in this 
country. And one way we can fix a lot of this is make these tax 
cuts permanent, just make them permanent, so we know the rules, 
right?
    And, you know, this conversation about interest expensing--
interest is an expense. Interest is not cash. There is no way 
you should be paying tax on an expense. That will run you right 
out of business. And we fight for that every single day, and I 
was responsible for getting interest deductibility in 2016. 
Because it is an expense. The government talks about it like it 
is income. So we have to fix that.
    And I could talk forever on this, but the thing we say to 
the government is, if we have to worry about taxes and we have 
to worry about this and can't be aggressive, you end up saving 
money to pay your taxes, which means you cut back on employees, 
you cut back on advertising, you cut back everything to pay a 
business that is broke money.
    And what they don't understand is that we need to make 
these tax cuts permanent so we can spend for growth. Because 
what the government doesn't understand--if we make money, they 
think we save money. We don't save money; we spend money. We 
grow, we hire people, we create more jobs, create all kinds of 
things.
    So that is kind of where we need to be, and that is kind of 
where we are, a lot of us.
    So let me get into my question here. I think there is one 
thing that we all agree on, that when a small business is able 
to keep more of their hard-earned dollars, it makes it easier 
for them to weather tough economic times but also grow. Okay? 
We also can grow when we have cash.
    And we have seen interest rates rising. I have been in 
business since 1971. I paid 20-percent interest. I know what 
that is like. And we have seen these interest rates rising on 
these huge principal balances. And the inflation, we haven't 
mentioned that--inflation and supply chain.
    So it makes it harder for all of us, as small-business 
people, to maintain our margins and stay profitable. Margins. A 
sale is one thing; a margin is something else, you see?
    So, now, more than ever, we need a Tax Code that is working 
toward growing the economy and making it easier to operate 
rather than harder.
    And, frankly, personally, I don't care what they do in 
Europe. We need to be driving the economy. They need to be 
following us, we not follow them.
    So, when the Tax Cuts and Jobs Act was passed, I thought 
one of the most important provisions was bonus depreciation. It 
allowed us to buy. It allowed us--also, Tier 1 and Tier 2 
suppliers were affected, right? Because we bought. And this 
allowed businesses to invest in hard assets, which made our 
operations more efficient. And it allowed employees to work 
with better equipment. That is important to stay ahead of the 
competition, making jobs easier and more efficient, and it 
allowed customers to be serviced by the most up-to-date 
technology.
    And I also am a calf-cow operator, Angus cattle, in Texas. 
And so you have touched on this, but I want you to say it 
again, Ms. Masser Ballay. You know better than anyone that 
farming has turned into a high-tech endeavor. And can you share 
with us again how the bonus depreciation affected family farms 
like yours and Tier 1 and Tier 2 suppliers that benefited from 
what you purchased?
    Ms. MASSER BALLAY. Absolutely.
    You know, I had brought up our palletization and bag-
filling, but we have invested in higher-tech harvesters, you 
know, for our potato operation. We have invested in combines, 
new planters. You know, we have really done a very--you know, 
updating a lot of our equipment in the last few years.
    Mr. WILLIAMS. And this is money that went to Main Street 
America too, because you bought it from them, right?
    Ms. MASSER BALLAY. Absolutely. Absolutely. You know, we 
always look to U.S. suppliers, you know, to go there first to 
try and implement in our facilities and in our fields.
    And, yeah, so we did quite a bit of investment, and it is 
all about, you know, creating an environment for our employees 
so they enjoy working for us and, you know, so that they have a 
good work-life balance and so that they are able to work safer, 
more comfortably.
    Mr. WILLIAMS. Well, if you didn't have that, you would have 
paid that money to the government.
    Ms. MASSER BALLAY. Correct, yes.
    Mr. WILLIAMS. And so the government would have created a 
job with your money, but with your money you create net worth. 
And that is the difference.
    Ms. MASSER BALLAY. Yeah.
    Mr. WILLIAMS. So I will have some more questions, but I 
yield my time back, Mr. Chairman. Thank you.
    Chairman MEUSER. The Chairman of the full Committee yields 
back, is very much appreciated.
    We are coming to a conclusion, but we do have the bounds to 
have a second round. I am going to take that privilege myself. 
I am not sure if any of my colleagues will be able to 
participate. So I yield myself an additional 5 minutes.
    Now, I think the participation here was not as robust as 
normal because we have a bipartisan understanding that this is 
that important and we will, in fact, work towards enhancing and 
augmenting the R&D tax credit. And I do hope that also means--
and I may turn to my Ranking Member here, colleague--the bonus 
depreciation as well.
    I think your testimony, all of you, was very compelling--
succinct, but compelling--all very consistent: the need for 
predictability, the need for a lower-cost environment in order 
for you to thrive, the need to have less burdens on your 
overhead, and less regulations--that is another story, of 
course--so as you can innovate.
    And, as you put it, it is the point of the spear, Mr. 
Wydra, as you put it. That creates new products innovations, 
new customers, which requires new advanced increases in your 
workforce, which leads to growth, which leads to profitability, 
as the Chairman mentioned, but profitability leads to higher 
levels of tax revenue, as we all know. So it all works together 
when it works together.
    But an overly burdensome set of regulations, usually 
imposed by the federal and state government, can very much 
diminish all that. And that is not what has made America great, 
and we have to recognize it. Because we are not alone in this 
world, and there are countries that are looking out for their 
interests and making themselves as competitive as possible.
    As I said earlier, the role of government is to do all 
possible to create a competitive work environment. It is not to 
create jobs. Your role is the job creator, not government.
    So I just want to ask this one question. Sometimes, you 
know, the word ``profits,'' again--and Chairman Williams 
brought up--seems to be not such a favorable word. But what do 
you do with your profits? I would like to ask that.
    Julie Masser Ballay, I would like to ask you first.
    Ms. MASSER BALLAY. So, with us being a family company, we 
keep it in the business. It goes right back to the business.
    Within our industry, it is very competitive. The grocery 
store--you know, we work a lot with grocery stores and produce 
distribution. That is an ever-growing industry, so you have to 
keep up with that pace of growth.
    So we are always keeping that profit in the business and 
reinvesting. Again, part of that is trying to keep our 
workforce, you know, safe and content. And so we are always 
putting that money right back in.
    Chairman MEUSER. Making yourselves built to last, making 
yourselves stronger.
    Mr. Wydra, same question.
    Mr. WYDRA. Yeah, same answer. Yeah, I mean, it goes into 
people development, it goes into equipment, it goes into 
expansion, it goes into, you know, automation--you know, all 
the things that you need to do.
    You know, we were talking about earlier about, you know, 
the bonus depreciation and, you know, how it helps you buy 
equipment, helps us buy equipment. For every bit of equipment 
you buy, you need to hire people to be able to run that, you 
know? And it just creates an engine of momentum forward. And 
that is where it goes.
    Chairman MEUSER. That is great. Well, we want to give you 
more predictability, because that roller-coaster business can 
be up and down, huh?
    Mr. WYDRA. You were waiting all day for that one, huh?
    Chairman MEUSER. With that, I will yield back.
    I will ask the Ranking Member, do you have any final 
comments?
    Mr. LANDSMAN. Yes. Thank you.
    Just to say, thank you all for being here and weighing in, 
your expertise.
    You know, as I think the Chair is alluding to, there is a 
reason why this is a shorter hearing--in part, because I think, 
you know, the consensus is there, in terms of resolving this, 
fixing what is a no-brainer. And, you know, what this helped 
reinforce for me is, one, how important it is, but also, two, 
that we have to help them get it over the finish line and get 
it done.
    So I appreciate you all and your work here today. Thank 
you.
    And I yield back.
    Chairman MEUSER. The gentleman yields. Appreciate that.
    Mr. WYDRA. What is it that will help you get over that 
finish line?
    Mr. LANDSMAN. It sounds like--thank you.
    Mr. Chair, is that okay?
    Chairman MEUSER. The gentleman is recognized.
    Mr. LANDSMAN. Yeah, thanks.
    It is good question. As a freshman, you know, I say this 
with some appreciation, or a lot of appreciation, for the fact 
that, you know, this is very complicated place. My hope is that 
it is a matter of leadership on Ways and Means and, you know, 
those of us who aren't on Ways and Means pushing, advocating, 
you know, making sure that it gets marked up, gets to the 
floor, talking to leadership, which I know the Chairman and I 
will both do.
    So it is really just getting it moving. I think, you know, 
the hope is, coming out of the last week's vote, that that was 
sort of a deck-clearing vote, in the sense that, you know, 
hopefully that will allow us to get a bunch of other things 
done. And this is one of them.
    Mr. WYDRA. Thank you.
    Chairman MEUSER. All right. The gentleman yields back.
    The Chairman of the full Small Business Committee, Mr. 
Williams, is now recognized for 5 minutes.
    Mr. WILLIAMS. Yeah, I want to bring up something that is 
not so bipartisan, okay?
    And so let me give you a scenario. In 1989, both--I am the 
only child--both of my parents passed away. My father--they 
left me with a lot of assets. He left me with no cash.
    And 3 days after we buried my father, I had the IRS sitting 
at my desk, wanting their money. And back in 1989, I think it 
was 60 percent with a threshold of $600,000. They wanted their 
money.
    I didn't have the money. I was employing 300 people in a 
profitable business. I didn't know what to do. I came this 
close to taking bankruptcy. But, fortunately, I had two older 
gentlemen that were able to talk to the IRS and we worked a 
deal out. And 20 years later, I paid them off.
    Now, this is money that could have gone to my church, this 
is money that could have gone back into my business, this is 
money that could have done a lot of things, okay? But it went 
to the government. And we are still operating at a deficit. I 
didn't pay the deficit off with the money I gave them, okay?
    So the biggest problem we have--we talk about that around 
here--is the inheritance tax. In my opinion, the inheritance 
tax needs to be zero. It is double taxation. And if you knew 
that, you would be able to manage your business even more 
differently and more aggressively, knowing that, in a family 
business, you wouldn't have to pay all the money to the 
government.
    So I know you are probably not prepared for this question, 
both of you, but talk a little bit about the death tax and how 
you operate and how you think about it. And it is a form of 
double taxation, as I said. And does that make it harder for 
you to run your business, or does it take you another direction 
sometimes, because you are worried about it?
    Ms. MASSER BALLAY. If I can speak to that first.
    Our family, in, you know, concern for that, took steps a 
number of years ago to prepare for that, before the changes 
that had been done with the postponing of that were in place. 
And so we had taken steps so that that was off the table. But 
those weren't--you know, those weren't inexpensive, by any 
means.
    Mr. WILLIAMS. But you buy an insurance policy.
    Ms. MASSER BALLAY. Well, right. Exactly.
    Mr. WILLIAMS. And you pay money for that.
    Ms. MASSER BALLAY. Yes, yes, exactly, exactly. So we were 
fortunately in the position where we were able to do that.
    What I would say is, especially for the small family 
farmer, you know, the smaller operations, they may not have the 
means for that. They may not have the ability to do that. That 
is always--you know, I sit on, you know, our local farm bureau. 
That is always a concern that comes up, is estate planning. 
That is something that is always addressed at a lot of 
different meetings, because that is a huge concern for family 
farms.
    You know, it is the exact same position you were in, which 
is land-rich, cash-poor. And, you know, a lot of people's only 
option is to liquidate and lose their family farm.
    Mr. WILLIAMS. Well, we raised the threshold to $11 million 
in 2016. Now we have people who want to bring it down to $5 
million and this and that.
    Do you want to answer that?
    Mr. WYDRA. Yeah.
    I mean, I think it is the--the biggest risk that I see with 
this is the collapsing of a company, you know? So, if somebody 
doesn't take the steps to plan correctly for this and they are 
forced into a situation similar to what you explained, that is 
an immediate elimination of a company at fire-sale prices.
    So, again, I have been here today to advocate for our 
employees and our families of our employees. And that becomes a 
devastating decision for them. So, you know, if that remains 
the way that it is, I could see a lot of small businesses 
struggling to make the tax bill, which is going to result in a 
lot of closures.
    And, you know, if you look at our population, it is moving 
to a point that a lot of that could potentially happen at a 
very common time. And I think that we need to be prepared for 
that as a country.
    Mr. WILLIAMS. Yeah. When you have 87,000 IRS agents running 
around out there----
    Mr. WYDRA. Yeah.
    Mr. WILLIAMS.--something bad is going to happen.
    Mr. WYDRA. Yeah.
    Mr. WILLIAMS. Anyway, I thank you for being here. Thank you 
for being entrepreneurs and risk-takers. You are what America 
is about.
    And, with that, Mr. Chairman, I yield my time back.
    Chairman MEUSER. The Chairman yields back.
    We now would like once again just to thank our witnesses 
for being here, making the trip, for all of your testimony.
    I am going to close this hearing.
    Without objection, Members have 5 legislative days to 
submit additional materials and written questions for the 
witnesses to the Chair, which will be forwarded to the 
witnesses.
    I ask the witnesses to please respond promptly.
    If there is no further business, without objection, the 
Subcommittee is adjourned.
    [Whereupon, at 11:12 a.m., the Subcommittee was adjourned.]
                            
                            
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