The Tax Break Dividing the Republican Party

By Russell Berman

There are few more-prized constituencies in American politics than small businesses, those emblems and underdogs of Main Street U.S.A. that are, as any seasoned officeholder will describe, “the backbone” of the nation’s economy.

And for Republicans trying to sell the public on the job-creating potential of a once-in-a-generation tax overhaul, there may be no handier example than Neutral Posture, the furniture company Rebecca Boenigk runs with her mother, Jaye Congleton, in Bryan, Texas. They launched the business in their garage on January 1, 1989, manufacturing and selling ergonomic chairs designed by Boenigk’s father, an engineer at Texas A&M. Twenty-eight years later, Neutral Posture is not so small anymore: What began as exclusively a chair company now produces entire office suites, right down to the cubicles. Boenigk, the 53-year-old CEO, employs 82 people in Texas, along with some 60 contractors in other U.S. states, Canada, and Puerto Rico.

Two years ago, Boenigk bought a new product line from Knoll, a prominent furniture-design firm, moving 43 truckloads of equipment 1,200 miles from Grand Rapids, Michigan, to company headquarters in Bryan. The multimillion-dollar acquisition resulted in 10 new salaried employees. And Boenigk is ready to expand again: Neutral Posture needs a new building for its centerpiece chair division. “Things are really starting to pick up and grow for us,” she told me by phone this week. “Right now we’re really working time-and-a-half, because we’ve got so many orders that we can’t get them all out in an eight-hour day. She added, “We need more space, and we need more people.”

Exactly how big Boenigk will build, and how many more people she’ll hire, however, depends to a significant degree on whether Congress expands a tax break that has emerged as a central point of contention among Republicans in their deliberations on tax reform. The debate pits the GOP’s more established big-business donor class against start-ups and manufacturers increasingly championed by the party’s lawmakers in Congress. Known as “full expensing,” the provision in question would allow companies to immediately deduct the cost of capital investments from their tax bill, including the purchase of new equipment and facilities like the one Boenigk wants to build. While many GOP economists tout full expensing’s potential for spurring economic growth, critics of the policy, including influential conservatives, say it’s just one more tax break in a system already rife with incentives and that its true benefits are questionable.

Currently, the rules for expensing vary by industry and are hard to parse, requiring companies to consult accountants and write off purchases over several years. “We can just make the best business decision we can make and hope we don’t get penalized too much for it,” said Boenigk, a Republican who testified in favor of the party’s tax-reform effort before the House Ways and Means Committee in July. “But if we knew that we had full expensing, the building would probably be bigger.”

That’s the argument Republican tax-writers in the House are relying on as they push to make expensing a cornerstone of …read more

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