American Ingenuity: Promoting Innovation through the Tax Code (House Small Business subcommittee hearing, June 6, 2023)

Summary

The printed transcript of a hearing titled American Ingenuity: Promoting Innovation through the Tax Code, on June 6, 2023 before the Subcommittee on Economic Growth, Tax, and Capital Access of the House Committee on Small Business, 118th Congress (Small Business Committee Document Number 118–016). The subcommittee met in Room 2360 of the Rayburn House Office Building, and opening statements are by Dan Meuser and Greg Landsman. The witnesses are Julie Masser Ballay of Sterman Masser Inc.; Bill Wydra of Ashland Technologies Inc., Hegins, PA; and Michael Kaercher of The Tax Law Center at NYU Law. The transcript includes their prepared statements and additional material from the Biotechnology Innovation Organization, the Competitive Carriers Association, Engine and the SBE Council; the subcommittee adjourned at 11:12 a.m.

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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

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 VELÁZQUEZ, 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

(II)
CONTENTS
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

(III)
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 [chair-
man 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 state-
ment.
Without objection, so ordered.
The Subcommittee is here today to hear testimony on the impact
of changes to research and development expensing and bonus de-
preciation 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 busi-
nesses. 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.
(1)
2

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 Rank-
ing 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 develop-
ment 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 depre-
ciation, which allow a small business to make significant invest-
ments they otherwise wouldn’t be able to make.
In 2017, the Tax Cuts and Jobs Act took the successful bonus de-
preciation credit to the next level, allowing 100-percent bonus de-
preciation for qualifying purchases. This law, which was a resound-
ing success on main street, changed deductions, depreciation, ex-
pensing, tax credits, and other items that truly significantly bene-
fited 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 exam-
ple, take a small business with $1 million in revenue—and this is
interesting—$500,000 in R&D costs, and $500,000 in deductible ex-
penses. 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 re-
search organization, found that restoring immediate expensing of
R&D will benefit both businesses and workers by increasing eco-
nomic 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 gov-
ernment take in record rates of revenue. This is a fact, and the
numbers prove it. Thanks to lower rates, overall corporate tax rev-
enue 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 an-
nually through 2027. Unless Congress acts soon, private-sector in-
novation, 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, Con-
3

gress, as a whole, continues to hold negotiations hostage by insist-
ing unrelated measures be included in any legislative remedy.
I am glad to have Congressman Ron Estes, a distinguished Mem-
ber of the Ways and Means Committee, joining us today to discuss
his efforts to ensure we continue to incentivize small-business in-
vestment in R&D. Congressman Estes’s bill, the American Innova-
tion 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 sup-
port, 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, ac-
counting 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 jeop-
ardize our standing on the world stage as the premier innovator for
tax year 2022. The Organization for Economic Cooperation and De-
velopment 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 dec-
ades, this country has out-innovated the world at every turn, and
without a strong innovative base, we will risk falling further be-
hind 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 im-
portant 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 eco-
system by attracting investment and bringing ideas from university
labs to market, advancing our quality of life and growing our pro-
ductive 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
4

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 coun-
try’s innovators. On one hand, we invested over $300 billion for ad-
vancing 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 Wil-
liams 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 Eco-
nomic Growth, Tax, and Capital Access hearing.
You know, our nation’s small businesses continue to face persist-
ently high inflation, interest rates that are being raised at the fast-
est 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 will-
ing—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.
5

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 busi-
nesses can thrive, can grow. And that includes commonsense initia-
tives 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 Car-
riers 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 Amer-
ican 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 Mem-
bers of the Small Business Committee, for allowing me to testify
today on this critical, bipartisan bill that impacts all of our dis-
tricts, 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 Innova-
tion 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 re-
quired 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 leg-
islation 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 in-
dustry 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
6

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 busi-
nesses of all sizes. According to the R&D Coalition, about 15 per-
cent of private U.S. R&D investments are made by small busi-
nesses with fewer than 500 employees. And, to some degree, that
has a major—a more outline of impact than it does for larger busi-
nesses.
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 Coali-
tion, 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 invest-
ment 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 pres-
ence. 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 re-
versed, 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 Kan-
sas 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 eco-
nomic 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 Lar-
son. We have worked over multiple Congresses to make this legis-
lation 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.
7

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, Pennsyl-
vania—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 com-
munity 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 Univer-
sity, 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, lo-
cated 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, includ-
ing 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 cus-
tomers.
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 Luetke-
meyer 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 intro-
duce 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.
8

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 Wash-
ington, 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 min-
utes have concluded, and you should wrap up your testimony.
I now recognize Ms. Julie Masser Ballay for her 5-minute open-
ing 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 ap-
preciate 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 po-
tatoes, mainly, throughout the Eastern Seaboard and have farm-
ing, packing, distribution operations supported by our team, with
an updated number of almost 400 employees at this point.
9

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 im-
pact 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 em-
ployees’ 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, im-
proving safety and efficiency. Innovation allows us to be in a posi-
tion 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 as-
sists us in accomplishing this so that we can continue to provide
a good work environment for our employees and put food on the ta-
bles of families in America.
10

Thank you again for the opportunity to take part in today’s dis-
cussion. 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 re-
marks.
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 develop-
ment, 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 competi-
tive 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 hap-
pens. 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 pri-
vate 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 devel-
11

oping, 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 fu-
ture needs of our customers and proactively deliver unique solu-
tions 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 sig-
nificant cash-flow crunch on our businesses.
So, not only does innovation go away, employee development pro-
grams 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 amuse-
ment industry, you have to do that. ‘‘It is kind of fun to do the im-
possible.’’ 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.
12

Chairman MEUSER. Well, thank you, Mr. Wydra. That was ex-
cellent.
Now we recognize Mr. Michael Kaercher for your 5-minute open-
ing 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 rev-
enue to fund investments outside the tax system, including federal
research grants for small-business innovation.
The 117th Congress enacted tax benefits intended to spur inno-
vation 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 manufac-
turing and equipment and for innovation across the energy sector.
For example, one of the IRA’s tax credits for advanced manufac-
turing invests $10 billion in projects with high potential for innova-
tion and commercialization. And starting in 2025, the law transi-
tions to a tech-neutral regime intended to spur innovations in pro-
ducing 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 li-
ability. Both the CHIPS Act and the IRA create new ways of giving
smaller and startup businesses better access to tax breaks for in-
vestment 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, entre-
preneurs, and workers needed for a dynamic and innovative econ-
omy. 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 grow-
ing 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, in-
cluding 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 serv-
ice for small businesses who want clear and timely help under-
13

standing 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 innova-
tion. It paid for corporate tax rates in part by requiring deductions
for certain research expenses to be taken over time rather than de-
ducted immediately.
But some lawmakers are proposing reversing nearly all sched-
uled 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 espe-
cially 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 advan-
tages that large tax evaders and avoiders currently enjoy over hon-
est 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 over-
come, 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 mak-
ing less and, of course, as stated, working more hours.
14

So the questions are: With the type of R&D reduction, bonus de-
preciation reduction, the threat that we hear of the 20-percent
small-business income deduction, what is that doing to your busi-
ness, 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 imple-
mentation 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 fu-
ture.
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 imple-
mented. 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 manu-
facturing. 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 de-
preciation goes away, we can no longer now, you know, really ex-
pand 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 rela-
tionship. 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.
15

Ms. Masser Ballay, you have a farm, a family business in be-
tween 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 deprecia-
tion, 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 auto-
mation, 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 in-
terest 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 nes-
tled right in between the 81/78 corridor. There are a lot of ware-
houses, 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 envi-
ronment for our employees——
Chairman MEUSER. Thank you.
Ms. MASSER BALLAY.—to keep them satisfied—yeah.
Chairman MEUSER. Thank you. Yeah, we need to give advan-
tages 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 busi-
nesses.
And so I am wondering if you have strong feelings about what
other sort of changes Congress should pursue to help small busi-
ness, 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.
16

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 get-
ting 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 to-
tally separate sort of direction.
So it really depends on what you want to prioritize and then, ul-
timately, 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 en-
sure 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 can-
not 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.
17

I mean, the interest rates—and it has been mentioned here—
have really crushed a lot of small businesses in terms of their abil-
ity 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 pay-
ments. 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. Chair-
man.
In 2017, the previous administration, as you know, as we have
been discussing, enacted the Tax Cuts and Jobs Act. And this com-
prehensive 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 in-
vest in R&D, leading to increased innovation and technological ad-
vancement. 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 in-
come 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 un-
competitive globally when it came to corporate and small-business
18

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 ham-
pered. 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 per-
spective?
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 compa-
nies, multinationals, often focus more on book profits than tax, and
so the level of incentive effect there is a little bit unclear.
19

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 actu-
ally 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—in-
terest 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 re-
sponsible 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 gov-
ernment 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 prin-
cipal balances. And the inflation, we haven’t mentioned that—infla-
tion and supply chain.
20

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 af-
fected, 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 pur-
chased?
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 po-
tato 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 al-
ways 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
21

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 im-
portant and we will, in fact, work towards enhancing and aug-
menting the R&D tax credit. And I do hope that also means—and
I may turn to my Ranking Member here, colleague—the bonus de-
preciation 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 men-
tioned, 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 rec-
ognize it. Because we are not alone in this world, and there are
countries that are looking out for their interests and making them-
selves 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 distribu-
tion. 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 rein-
vesting. 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 peo-
ple 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 equip-
ment, 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
22

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 com-
ments?
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. Wil-
liams, 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 profit-
able business. I didn’t know what to do. I came this close to taking
bankruptcy. But, fortunately, I had two older gentlemen that were
23

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 gov-
ernment. 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 busi-
ness, 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,
24

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 coun-
try.
Mr. WILLIAMS. Yeah. When you have 87,000 IRS agents run-
ning 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 ad-
ditional 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 Sub-
committee is adjourned.
[Whereupon, at 11:12 a.m., the Subcommittee was adjourned.]
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