August is a dreary month in Washington, D.C. It’s hot and muggy – Washington is mostly built on filled-in swampland, after all – and everybody leaves town, including Congress.

Meanwhile, Congress’ approval rating is at 14%; the Government could shut down Oct. 1 without an approved budget; a nuclear treaty with Iran is pending; the Highway Trust Fund needs to be reauthorized by Oct. 29; and the debt limit once again will be reached by late October without Congressional action.

Forgers in the U.S. are concerned about all those matters, of course. But they’re also concerned about some other issues that could affect the industry directly, and they’ve been making their voices heard.

Regulatory Overreach

Conservative commentator Charles Krauthammer recently said this about the EPA: “They are at once omnipotent and incompetent.” It’s the best description I’ve heard in a long time. In the midst of creating their own environmental disaster on the Animas River in Colorado after a contractor caused a spill of hazardous waste from a mine cleanup site, the EPA still managed to publish two proposed rules with significant negative consequences for manufacturers in general and forgers in particular.

First, the EPA issued their final rule for regulating greenhouse gas (GHG) emissions from new and existing coal-fired power plants. Although significant changes were made from the proposed rule, the end result is the same. Many coal-fired power plants will be forced to close, stressing the reliability of the power grid; electricity prices will increase for manufacturers and residents; and states will have the option to participate in cap-and-trade regimes and regulate “outside the fence” (i.e., manufacturing operations like forging) to reach their GHG emissions targets.

According to the EPA’s own estimates, the plan would produce a global temperature reduction of .0015 degrees by 2020 if the plan were implemented immediately – too small to measure with current technology, let alone affect rising sea levels, droughts and other predicted disasters. FIA has been active in the Partnership for a Better Energy Future (PBEF), a broad coalition opposing the EPA’s plan that has filed comments urging it to withdraw the rule.

The EPA’s other proposal would lower the current ozone standard below the 2008 levels that cities and counties are still trying to implement. According to some studies, this rule could be the most expensive regulation ever promulgated (if it can even be achieved with current technology). To paraphrase Mr. Krauthammer, the EPA may not know what it is doing, but they intend on doing it anyway.  FIA was a signatory on a letter to the President saying that no changes should be made until all areas are in compliance with 2008 levels.

Comprehensive Tax Reform

FIA has actively supported comprehensive tax reform for the past several years, working with members of both the House Ways and Means Committee and the Senate Finance Committee to ensure that the views of U.S. forgers were taken into account in any proposed reforms.  In particular, FIA has argued that all manufacturers should be treated equally, since many U.S. forgers are organized as “pass-through” entities such as LLCs, partnerships or Subchapter S Corporations, where income is “passed through” and taxes are paid by the owners at individual rates rather than corporate rates.

Unfortunately, in spite of the fact that the current Chairmen of the House Ways and Means Committee (Paul Ryan) and Senate Finance Committee (Orrin Hatch) would welcome comprehensive tax reform, the current political environment will not allow it. That means another year of “tax extenders,” where items of importance to forgers, such as bonus depreciation, are retroactively extended for 1-2 years.

The only potential for agreement this year or early next year is on international tax reform. Why? Due to our somewhat unique system of taxing corporate profits earned outside the U.S. when the money is returned, there is $2 trillion of American capital parked outside of the U.S. Most countries levy taxes only on the income earned within their borders. According to supporters of international tax reform, moving from a “worldwide system” to a more “territorial” system could encourage that capital to be returned to the U.S. for reinvestment, and a modest one-time tax on it could help pay for the Highway Trust Fund.