[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.] A P P E N D I X [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]