JULY 2012
ON THE INSIDE: TIM SULLIVAN TO TALK JOBS
KEATING ON TAXES
GATEWAY TO MILWAUKEE
COURSIN ON CONSTRUCTION
CATERPILLAR HEAVY MINING EVENT A HOT SUCCESS
July 20th - Mr. Tim Sullivan Special Consultant, Business & Workforce Development State of Wisconsin As Special Consultant for Business and Workforce Development, Mr. Sullivan helps identify barriers to business development and job growth in Wisconsin. His focus is on workforce, employment environment, and policy issues. He helps identify and cultivate business prospects for expansion and relocation to Wisconsin. Mr. Sullivan also heads up the Office of Business Development, serves as Chairman of the Council on Workforce Investment and is a member of the College and Workforce Readiness Council. Mr. Sullivan is serving the state as a volunteer and recently served as President and CEO of Bucyrus International. Friday, July 20th, 7:00 am – 9:00 am / The Wisconsin Club, 900 West Wisconsin Avenue Member - $30 • Guest - $40 - To register, click here.
BUSINESS BEHIND THE SCENES TOUR: CATERPILLAR HEAVY MINING 30 IBA members were treated to a behind the scenes at Caterpillar Heavy Mining in South Milwaukee. Outside temperatures soared into the mid 90’s giving all a unique appreciation for welding in summer while wearing full safety gear. No photos of the production area were allowed but suffice to say, everything was HUGE. Our next BUSINESS BEHIND THE SCENES takes place in early November and it’s going to be a good one - stay tuned for details! Safety briefing before the tour.
Scale models in the museum helps put big parts into perspective.
IBA CONTACTS
The shovel simulator was a big hit. How many tons can you load?
IBA MEDIA LINK
President.....................................................Steve Kohlmann Secretary......................................................John Weber
Governor Walker’s message
Treasurer.....................................................Casey Malek
Click here to listen.
Programing, State & National Issues...........Jeff Hoffman Membership / Sponsorship........................Heather Baylor
My Friend Dell Steve Kohlmann, IBA President
My friend Dell died today and as I write this there are tears in my eyes. Dell suffered from a worn out heart that just couldn’t pump anymore. He was 77. Dell and I had a casual acquaintance at first. We both had a love affair with motorcycles but over the years that steadily grew into meetings where we would discuss everything from cars to politics & world events to business practices and life in general. After my Dad passed away Dell sort of became my source for fatherly insight during times I really needed it. And being in sales during a brutal recession, I needed it often. Dell served on a aircraft carrier during Korea. He was the guy who would operated the cable that launched and captured aircraft. Treacherous work, especially at night during heavy seas. After his service in the Navy he went to work for Falk Corporation as a machinist and then started a small machine shop of his own. He was big into motorcycles in those days and came upon the realization that when he drove across the United States to motorcycle events, his hand became tired from holding the throttle open for hours on end. This prompted him to create a little throttle locking device that would go into the end of the bike’s handle bar locking the throttle open but could be ‘turned off’ with a quick twist of the hand. After a series of prototypes, the “Throttlemeister” cruise control for motorcycles was born. Dell’s first run of 75 Throttlemeister’s went to a rally with him (Denver, I think) and he simply laid out the devices on a blanket next to his bike and people started coming up to buy them. If they didn’t have money – or a check - he asked for their information and sent them a invoice in the mail. Business done on a handshake. Dell reported to me that everyone sent him a check. Today, Throttlemeisters are well known in the motorcycle community and are even the device of choice for police bikes in France. His business continues today employing a full time crew. Pretty impressive. Dell was a huge fan of BMW cars and motorcycles. A few years back he called me to say he was having leg problems and could no longer shift his manual transmission on his 2001 530 BMW. He wanted to sell it and get a BMW with automatic transmission asking me if I would come over and take a few photos of the car and help him write an ad so the car could go on Craig’s List. As I was taking photos of the pristine car (40,000 miles in 9 years - geeze!) he immediately sensed my interest. “I believe you should take it home for the weekend.” He casually remarked. “I believe I will.” I replied reflexively, like Dean Martin placing a drink order. A few days later the car was in my garage - for good. Over the years we talked a about a lot of things, business being an important topic.. We talked a lot about ambition, drive, ethics, honor among other things. Dell turned me onto Dr. Deming and his philosophy of customer service and excellence. I turned Dell onto Jim Collins and the book Good To Great. The day he died he went out to fly his radio controlled airplane at a flying field in Menomonee Falls. It was a spectacular sunny day and he loved spending time there flying. I’m told he had some great flights that afternoon. That evening, at his house, he collapsed and passed away after heroic attempts to save him by paramedics. Like my own father, Dell reinforced the notion of taking advantages of opportunities, learning all you can, try to improve your life situation for you - and others - and to treat people fairly whether in your personal or business life. Solid advice for all of us. Thanks Dell.
Raymond J. Keating
The expanded death tax would hit small businesses, family farms and investors hard. After a lifetime of paying all kinds of taxes and fees, the government shows up at death seeking more than half of one’s assets. That’s devastating to a family business, to an investor, and to the investment that businesses and the economy need to grow and create jobs.
There’s a great deal of talk about a “fiscal cliff” in political, policy and media circles these days. It references a combination of tax increases and federal spending “cuts” that are scheduled to kick in at the start of 2013, resulting in a big hit to the economy.
• The President has called for extending 100 percent expensing of capital expenditures for all businesses through 2012 (it was reduced to 50% at the end of 2011). But if achieved, that means it would expire next year, thereby creating incentives to shift the timing of investments, but not provide a real incentive for boosting investment overall.
Pushing Small Business Off the Tax Cliff
But let’s be clear about the real threat here. Specifically, it’s a “tax cliff” that the economy is at risk of falling over in January. Others have called it “Taxmageddon.” Contrary to the assumption of Keynesian economists and liberal politicians, high levels of federal spending are negatives for the economy, as resources, whether through taxes or borrowing, are drained away from the private sector. Reducing federal spending is an economic positive, not a negative, especially when combined with real tax relief.
Specific to small firms is the Section 179 expensing provision. In 2011, firms could expense capital spending up to $500,000, with the Section 179 deduction being reduced dollar for dollar above $2 million in capital outlays. In 2012, the expensing level fell to $139,000, with a phase out cap at $560,000. And for 2013, Section 179 expensing would fall to $25,000 with a phase-out cap at $200,000. Again, the negative for small business investment should be clear to all.
And make no mistake, this 2013 looming “tax cliff” ranks as a significant threat to entrepreneurs and small businesses. Consider key tax increases scheduled for the end of this year:
Indeed, this tax cliff looms as a major threat to taxpayers in general, including, most assuredly, to the entrepreneurs, small businesses and investors that drive economic growth, innovation and job creation forward.
• Personal income tax rates would increase for all income levels, with the bottom rate rising from 10% to 15%, and the top rate from 35% to 39.6%. Once the Medicare payroll tax is added in – with it scheduled to increase on upper income earners under ObamaCare from 2.9% to 3.8% -- the top federal income tax would rise 37.9% to 43.4%.
Unfortunately, by pushing for tax increases to go through on upper income earners, the President is more than willing, apparently, to push many small businesses off the tax cliff. Interestingly, many of the President’s Democratic colleagues aren’t so sure about this.
This not only creates real disincentives for individuals to undertake entrepreneurial activity, but it directly hits the bottom line of most businesses, since more than 92% of businesses pay the personal income tax (as sole proprietorships, partnerships, S-Corps and LLCs, for example) rather than the corporate income tax. • The top individual tax rate on capital gains would jump from 15% to 20%. However, the 3.8% Medicare income tax on upper incomes would be extended to cover capital gains as well, driving the top capital gains tax rate to 23.8%. For good measure, factor inflation into the equations, and the real capital gains tax rate goes even higher.
For example, as noted in a June 8 article from The Hill, three Democratic senators – Claire McCaskill (MO), Bill Nelson (FL) and Mark Pryor (AR) – were less than thrilled with the White House threat that it would not stop the tax increases on upper incomes under any circumstances. Also, Senator Kent Conrad (D-ND) was quoted by Politico saying that the current tax rates would have to be extended for all income levels. And in early June, President Bill Clinton told CNBC that he thought all of the current tax rates would have to be extended into next year. None of these Democrats have been shying about raising taxes in the past, but they all have serious doubts about doing so in this bad economy.
From an entrepreneur’s perspective, the capital gains tax arguably is the most destructive tax around. After all, it is a direct tax in risk taking, that is, it diminishes the potential returns on starting up, running and investing in a business. Higher capital gains tax means less entrepreneurial activity.
In the end, entrepreneurs, small businesses, investors, consumers and job seekers not only need to see that the “tax cliff” has been removed altogether, but that permanent tax relief is being implemented to incentivize the entrepreneurship and investment that are the sources of economic growth.
• The tax rate on dividends would increase as well, with the top rate moving from 15% to 39.6%, plus the 3.8% ObamaCare tax taking the top rate up to 43.4%. Again, the big issues here are that incentives to invest would be reduced, and investors would have fewer resources for investing in small and mid-size enterprises.
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council in Washington DC.
• The death tax, which was terminated in 2010, returned in 2011. At the end of this year, the tax would go from an exemption level of $5.12 million (indexed for inflation) and a rate of 35% to an exemption level of $1 million (not indexed for inflation) and a rate of 55 percent.
www.sbecouncil.org
New Member Profile Spectrum Communication Services Inc. has been providing telephone answering and call center services to businesses in Southeast Wisconsin and beyond since 1983. Spectrum serves clients from dozens of industries with a combination of efficient, high-tech data management software and the warmth of live voices in both incoming and outbound calls. The Association of TeleServices International, the preeminent
group representing answering service and call center owners, has honored Spectrum with its Call Center of Distinction and
Answering Service Award of Excellence for eight years running. Services range from traditional after hours telephone answering services to “as-needed” remote receptionist and service ticket management. The call center side can run surveys, manage catalog orders, pre-certify insurance claims, pre-screen technical support and many other services. Spectrum’s workforce is unusually consistent, with an average employment length of nearly triple the industry average.
Welcome New IBA Members George & Tracy Milkowski Jacksten Holdings Spectrum Communications Grace Matthews Heresite Protective Coatings Circle Electric Baker Tilly Virchow Krause, LLP Northwoods Software Development
For more information, visit Spectrum’s website at www.spectrumcomm.com.
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You Can Make a Difference In Wisconsin! Spread the word of IBA to your business associates pass on the new IBA brochure. Download it in PDF format at or pass the link on to your friends in business. Available at www.ibaw.com
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MEET OUR NEWEST SPONSOR...
Industrial Towel & Uniform, Inc. (ITU) is one of the laundry service companies owned and operated by the Leef family, now in the fourth generation of ownership. ITU provides a full range of industrial launderable products and services in Wisconsin, Illinois and Pennsylvania. Our facilities in New Berlin, Wis.; Neenah, Wis; and Titusville, Penn., utilize advanced processing systems for wastewater, VOC emissions and other environmental controls. ITU plants generate virtually no hazardous waste, even though those facilities process thousands of tons of soiled textiles each year. ITU provides environmentally preferable services. Products include mats, garments, absorbents, towels, mops, gloves and first aid. ITU has over 75 years of experience and service excellence in the industrial laundry business. AbsorbTech, LLC, an ITU partner, was founded in 1996 to process and service SorbIts®. AbsorbTech’s plant in South Bend, Ind., is a unique facility. AbsorbTech became the first laundry facility to achieve ISO 9001:2008 and 14001:2004 registrations in the U.S. AbsorbTech is unmatched in recovering and recycling hydrocarbon soils. SorbIts® is the leading launderable, reusable line of absorbents in the United States. In 2007, a facility in Piedmont, S.C., was acquired to process SorbIts® for the southeast United States.
IBA MEETING AUGUST 17TH TOM RAVE THE GATEWAY TO MILWAUKEE
The Gateway To Milwaukee is the brand name for an area around General Mitchell International Airport. Mr. Rave has been the Executive Director since May, 2008. The Gateway’s role is to improve the vitality in the area around the Airport by actively impacting government direction, enhancing the area through security and beautification, marketing the area for economic development and creating mutually beneficial networking opportunities for businesses in The Gateway. To register click here.
IBA MEMBER ACQUIRES Weber indicated, “We will continue to do what Hypneumat NEW COMPANY Hypneumat, Inc announced on May 1st 2012 that it had been purchased by John Weber, a Milwaukee area Business Executive. Hypneumat, Inc. is a manufacturer of industrial automation products under the Hypneumat, Commander and Snow brand names. “I am extremely pleased to be able to become a part of the long standing tradition of this company. Hypneumat has expanded its offering over the years with the additions of Commander and Snow lines to become a recognized leader in industrial automation and with my ownership we plan to continue that tradition,” said Weber. Hypneumat will continue to operate at their Franklin facilities with the existing management and labor team.
Inc. does best, providing automation products and solutions for our clients.”
Investment in additional equipment and personnel are being planned to add contract machining services to the offerings of Hypneumat. Hypneumat Inc., located in Franklin Wisconsin, has been a leader in the industry for over 60 years providing a full line of drilling units, tapping units, machines and controls. Additionally, Hypneumat manufactures multiple spindle heads under the Commander brand name and manufactures drilling machines and tapping machines, clutch-type tapping heads and fixtures under the Snow brand name. John Weber is an IBA Board Member.
CRAIG COURSIN MSI GENERAL “...you are in-charge of the process by making decisions. It is really that simple.”
Building Construction Is Worthy of Time and Thought Investment. Construction is not a commodity. I’m always amazed at the crazy things some competitors in the design and construction industry do. Your choice for a design/build partner can save you from costly mis-steps in the construction process. Building or remodeling is an important step in any company’s history and should not be taken lightly. Many owners seem to think construction is like buying a thing, but it is really a process. I always wonder where this idea of commodity comes from, I’m sure it is a result of our typical pattern of buying from a store. In any case construction is not a commodity, it’s a process driven by owners decisions. Lately I’m seeing competitors using a form of Bait and Switch. They take advantage of the owner’s lack of understanding of the process of design and construction and tell them they can build the building for $7.00 per square foot less than we can. It is easy to take out certain key elements from an estimate and tell someone your price is lower, however, when the project is completed the costs will not be at that lower price. Down the line they find out that the price did not include everything so they have to add some change orders. It does not do you any good to find out the price has gone up after you select your partner. This pattern
repeats so often it is scary. Our focus at MSI general is showing the client a realistic budget early in the process, noting the costs that are likely to come up on the project and allowing you to make good decisions. The main point here is you are in-charge of the process by making decisions. It is really that simple. Process takes time. There is no substitute for taking the time to make good decisions. With each step there is a decision process. All communities have some form of Plan Commission, architectural review, permit review, etc. There are multiple layers of review and agencies that you must work with, including the power company, natural gas, city, state, and DNR. They all like to take their time. This year has been pulsing, but the pace of early design and budgeting process has kicked into high gear in May and June, with many people wanting to get underway ASAP. The best advice I can give to you is to talk about your plans early, and give yourself the time to make good decisions. The process and building will be more enjoyable if you look at as a process of owner decisions. Craig Coursin AIA President of MSI General Corporation