Allowing companies to channel profits back into their business through Manufacturers’ Reinvestment Accounts (MRAs) could help revive the nation’s manufacturing industry, according to U.S. Sen. Richard Blumenthal.
Blumenthal (D-CT) visited Air Handling Systems, a small manufacturing company in Woodbridge, Thursday to help develop a strategy for passing legislation for allowing the MRAs.
He and Air Handling Systems President Jamison Scott said MRAs are similar to IRAs, Individual Retirement Accounts, which allow people to save pre-tax income to create a retirement nest egg.
But instead of retirement, the MRAs provide businesses a special tax benefit that, according to Scott, would help small businesses compete with foreign competitors.
Manufacturers could save the money for up to seven years, then pay only 15 percent in taxes when they withdraw it to hire or train new employees, buy new machinery or expand their manufacturing operations.
"They pay half the tax they would otherwise," Blumenthal said.
"This is what 'Main Street' needs," said Scott.
So far, he said, much of the economic help from the federal government has benefited Wall Street and big corporations, but MRAs would benefit small manufacturers like his company.
Scott, who is a past president and board of directors member of the New Haven Manufacturer’s Association, said he first heard of MRAs from Hugh McCann, a Bridgeport businessman.
He helped McCann get U.S. Rep. Rosa DeLauro (D-CT) interested in the idea. She introduced a bill in the U.S. House of Representatives last summer but was unable to get it to the floor for a vote.
Blumenthal said he would introduce the bill in the Senate later this month and is optimistic about its prospects. He said passing the bill in the Senate would improve the prospects for passing DeLauro’s bill, even though Republicans control the House.
Blumenthal said it is really not a partisan issue and has much appeal to congressmen and senators from both side of the aisle. It doesn’t involve new spending, only tax cuts, he said.
He also hopes to get the support of national manufacturing associations, which would also help overcome any partisan inertia.
Scott and his father, David E. Scott, the company president, gave Blumenthal a tour of their operation. Air Handling Systems makes ductwork and noise mufflers for controlling dust and fumes in industrial facilities.
They said they previously got much of their business from companies that make wood shelves, cabinets and furniture. Lately they have sold their systems to the U.S. military, including the Navy submarine base in Groton, CT, and Army bases in Iraq and Afghanistan.
The family started the business in 1950 in Stratford, moved it for a time to Bridgeport, and relocated it 21 years ago to Woodbridge. Most of its employees have been with the company for decades.
Scott told Blumenthal that the recession that started in 2007 hit the company hard.
"We cut expenses. We cut everything we could," he said.
Unfortunately, he added, they ended up having to layoff employees.
But Air Handling Systems has recently found customers in South America and Asia. As it expanded its sales into foreign trade, Scott told the senator the company has encountered problems it never had to deal with before, such as China’s currency manipulation that artificially keeps Chinese goods less expensive than American goods.
That is why his company and other small manufacturers need the tax break they would get from the MRAs.
"They need that competitive advantage that other countries give their companies," Blumenthal said.