Will the Equipment Industry Recover from the Recession?
Beneficial impact of a multi-year highway bill
Enacting a multi-year surface transportation bill that increases highway and bridge funding would create jobs in the equipment industry and increase demand for equipment (which would help ailing manufacturers).
Some specifics follow:
- 69 percent of respondents said they would add equipment to their rental fleets if Congress enacts a new multiyear highway bill that increases road and bridge investment;
- 46 percent would rehire laid off workers;
- 37 percent would add new positions;
- 4 percent would open a new facility (or facilities); and
- 2 percent would reopen a closed facility.
Distributors highly skeptical about new health care law
Consistent with the surge in grassroots opposition from AED members prior to the enactment of the new health care reform law, AED says its members are very concerned about the law’s negative impact:
- 85 percent believe the new health care law will undermine the quality of health care, increase costs and taxes for their companies, and make it harder for them to provide insurance to their employees;
- 11 percent think that the new law won’t have much impact, whether positive or negative; and
- 4 percent think it will improve health care, reduce insurance costs, and make it easier to provide insurance to employees.
Tax issues greatest threat
AED members were asked to assess the negative impact on their companies of pending tax, labor, and environmental policy proposals on a scale of one to five (1 meaning no impact and 5 meaning very negative impact). Respondents prioritized the threats as follows:
- Increasing capital gains tax rates (average score of 4.44);
- Allowing the new 3 percent tax on government contractors to go into effect as planned in 2012 (4.36);
- Increasing marginal tax rates (4.34);
- Unilaterally imposing limits on U.S. carbon emissions through climate change legislation or new EPA regulations (4.31);
- Allowing the National Labor Relations Board to alter current policies to make it easier for unions to organize (4.25);
- Eliminating right to secret ballots in union organizing elections (card check) (4.23);
- Imposing binding arbitration on union contract negotiations (3.97); and
- Repealing LIFO (3.08). [LIFO is the term used for the last-in-first-out (LIFO) method. Under this method, according to AED, it is presumed that the most recent purchases of inventory are sold first. This is based on the notion that during periods of inflation dealers are reinvesting money into their business by purchasing inventory at current market prices rather than saving money by selling older, less expensive inventory, AED says. In order to value ending inventory, a dealer utilizing LIFO must establish a “reserve” that essentially represents the amount reinvested into inventory by the dealer, according to AEM].
The survey results are consistent with several prior surveys showing that between 30 and 40 percent of AED members used LIFO. In this survey, 41 percent rated the threat of LIFO repeal as a 4 or 5 on the five-point scale. Based on past analyses suggesting that LIFO repeal would cost AED members alone more than $900 million in retroactive liability, AED will continue to play a leadership role in this issue.
The Association of Equipment Distributors (AED) explains how it conducted the survey and compiled the results.
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