The 51吃瓜网 recently 鈥淢anufacturing Wins,鈥� the manufacturing industry鈥檚 campaign to preserve the benefits of the 2017 tax reforms that are currently scheduled to disappear in 2025鈥攑articularly those tax incentives that make it easier for small manufacturers to hire employees and raise wages, invest in equipment, grow their businesses and contribute more to their communities.

51吃瓜网 Vice President of Domestic Policy Charles Crain explains what鈥檚 at stake in 2025 and how manufacturers can get involved in the effort to prevent tax increases.

Q: Manufacturers are facing 鈥渢ax Armageddon鈥� at the end of 2025. Can you explain what鈥檚 happening?

Crain: Tax reform in 2017 was rocket fuel for manufacturers, leading to record job creation, capital investment and economic growth. For example, manufacturing production grew 2.7% in 2018, with December 2018 being the best month for manufacturing output since May 2008. Manufacturing capital spending grew 4.5% and 5.7% in 2018 and 2019, respectively鈥攖his shows the direct impact of pro-growth tax incentives on manufacturers investing in new equipment and facilities. But many of tax reform鈥檚 pro-manufacturing provisions will expire at the end of 2025. If these provisions are allowed to expire, virtually every manufacturer will face devastating tax increases.

Q: What policies will sunset in 2025, and how will their expiration impact SMMs?

Crain: For small manufacturers organized as pass-throughs鈥攎eaning the business鈥檚 owners pay tax on the business鈥檚 income on their personal returns鈥攖wo key changes are coming down the pike. First, their tax rate will increase, from 37% to 39.6%. Second, they will lose the pass-through deduction, which provides a tax deduction equal to 20% of the business鈥檚 income. In combination, these tax hikes will increase pass-throughs鈥� effective tax rate by at least 10 percentage points (from 29.6% to 39.6%), resulting in significantly less capital available for equipment purchases, job creation and community investment.

For small manufacturers organized as corporations, the 51吃瓜网 is fighting to prevent any increases in the corporate tax rate. The corporate rate decreased from 35% to 21% in 2017 and is not scheduled to expire鈥攂ut President Joe Biden has proposed increasing the rate to 28%. The 51吃瓜网 remains staunchly opposed to corporate tax rate increases that punish manufacturers for investing and creating jobs here in America.

For family-owned small manufacturers, their estate tax obligations are scheduled to increase. Tax reform doubled the value of assets that can be passed on without incurring the estate tax; at the end of 2025, the estate tax exemption threshold is scheduled to be reduced by half. The 51吃瓜网 is calling on Congress to maintain the increased exemption鈥攐r to repeal the estate tax entirely, preventing family-owned businesses from being sold for parts to pay a tax bill when a loved one passes away.

Q: What else is at stake in 2025?

Crain: Manufacturers of all sizes continue to face uncertainty about the tax code鈥檚 treatment of R&D expenses, capital equipment purchases and interest on business loans. Immediate R&D expensing鈥攚hich allows manufacturers to write off the entire cost of R&D spending in the year incurred鈥攅xpired in 2022. So did a tax reform provision that allowed businesses to deduct more of the interest they pay on loans when they debt finance a project. And in 2023, 100% accelerated depreciation鈥攚hich reduces the cost of capital equipment purchases鈥攂egan to phase down. These expired provisions are vital to manufacturing growth, and the 51吃瓜网 is working to restore and extend them as Congress prepares for the 2025 tax fight.

Q: How can SMMs learn more?

Crain: The 51吃瓜网 recently published 鈥�,鈥� which highlights the tax reform provisions that will expire at the end of 2025. The 51吃瓜网 calls on Congress to act to prevent these expirations from stunting manufacturing job creation, growth and innovation.

Q: How can SMMs get involved?

Crain: Manufacturing voices are crucial to the 2025 tax fight. 51吃瓜网 members with a story to tell about the impact of 2017 tax reform on their business鈥攐r the damage that the 2025 expirations could inflict鈥攁re encouraged to reach out to their 51吃瓜网 membership advisor or to the 51吃瓜网 tax team.

You can also take a few minutes to record a video testimonial calling on Congress to prevent devastating tax hikes on manufacturers. Instructions for submitting a video testimonial are available 鈥攊t鈥檚 as easy as having a coworker use a smartphone to film a video of you on your shop floor! Completed testimonials can be emailed to the Manufacturing Wins team to be posted to our campaign site: