One way to spur manufacturing in Maryland

Marlin Steel CFO Alex Levin testifies in support of Maryland Senate Bill 466

Although manufacturing's stature in Maryland has contracted with events such as the closure last year of the once-massive steel facility at Sparrows Point, manufacturing remains a vital part of the state’s economy. More than 113,000 people work in manufacturing in Maryland, with average compensation of nearly $80,000. Manufacturing continues to be the foundation for many middle-class families, who are able to afford home ownership and higher education for their children. It accounts for about 90 percent of all the goods that Maryland exports around the world, much of it through the Port of Baltimore. And as the country’s largest employer of engineers and patent-holders, manufacturing is well-positioned as a driver for future economic growth in Maryland, which already attracts the greatest concentration of scientists and PhD's in the country.

Our company, Marlin Steel, manufacturers material handling containers from steel wire and sheet metal for a wide range of industries, from automotive to pharmaceuticals. Alex Levin, the chief financial officer of Marlin Steel, and Dr. Michael Galiazzo, executive director of the Regional Manufacturing Institute of Maryland (RMI), testified yesterday before a Maryland Senate committee in support of Senate Bill 466.The legislation would have Maryland join with federal tax law that allows faster depreciation of investments in capital equipment to spur manufacturing. We blogged earlier this year how the federal tax law helped Marlin hire three workers after we added a laser sheet metal cutter. The rule change freed capital that otherwise would have been spread over seven years of depreciation. The tax rule change has particular resonance for small-to-mid-sized manufacturers because it’s capped at $500,000 and because those are businesses that are likely to make major equipment investment. The tax depreciation on that equipment will occur under existing tax law, just more slowly; under the proposed legislation, a portion of it happens faster for more immediate investment and hiring, which delivers its own positive revenue benefits for Maryland. Other states in the Mid-Atlantic and beyond already align with federal tax law on this. Washington has reauthorized the bonus depreciation rule several times to boost job creation during the recession and more recently in the "fiscal cliff" legislation this year.

Dr. Galiazzo yesterday pointed to President Obama’s emphasis on manufacturing in his recent State of the Union Address. He mentioned that the administration and several states, universities and companies have joined to invest $70 million to develop the National Additive Manufacturing Innovation Institute (NAMII) in Ohio to advance 3D printing. The technology turns digital images into physical versions of new products to speed design and testing. Dr. Galiazzo showed off a small "head" of a legislator whose image had been turned into a composite model during a recent demonstration of 3D printing technology at the state capital. It’s the kind of advanced technology that Senate Bill 466 could help propel in Maryland, he said.

If we had time to present all of our testimony yesterday, the committee would have gotten a good picture of the importance of technology investment to grow manufacturing. More than a decade ago, Marlin Steel's sole business was producing baskets for bagel bakers. We were good at it, the biggest in the country in fact. But the dumping of raw steel on the U.S. market by the Chinese government and the low-carb Atkins diet nearly flattened our bagel basket business. A fateful contact with an aerospace engineer who needed a specialty basket to carry a sensitive part through an assembly process led us fortuitously to change our business model. Compared to building bagel baskets, however, it requires great engineering, equipment and exactitude, sometimes plus or minus the width of a human hair, to manufacture containers for the precision industries we now serve. Without the $3.5-million in capital investment that we’ve already made in automation -- in robots that bend steel 60 times faster than we could before or that press metal with the force of the weight of 10 automobiles -- we could not compete in this global marketplace.

That is the secret sauce not just for Marlin Steel but for many types of manufacturing throughout Maryland and the United States. Automation, speed, quality, accuracy, dependability are the qualities with which we outflank a foreign competition built on cheap labor and without rule of law, IP protection and environmental controls. The improved depreciation rules for business equipment investment strengthens the core of our competitive advantage. Speeding our ability to invest in technology and people will aid our state’s economy. We hope the Maryland Senate Budget and Taxation Committee gives a favorable review to Senate Bill 466 to stimulate future investment, job growth and competitiveness for Maryland.