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Vice Presidential Candidate Paul Ryan and the Bill to Amend Federal Excise Tax on Arrows

In 2003, Congressman Paul Ryan led ATA efforts to amend the federal excise tax on arrows along with Michele Eichler of Muzzy Products and Jim Easton of Jas. D. Easton Inc.

In 2003, Congressman Paul Ryan led ATA efforts to amend the federal excise tax on arrows along with Michele Eichler of Muzzy Products and Jim Easton of Jas. D. Easton Inc.

When Gov. Mitt Romney chose Rep. Paul Ryan as his running mate for the 2012 Republican presidential ticket, he inadvertently pulled the Archery Trade Association into national news reports as media scrambled to decipher one of two bills Ryan passed into law during his time in Congress. The bill in question was the outcome of the Wisconsin congressman and bowhunter’s work to help the ATA resolve critical federal-excise-tax (FET) issues.

In the days after Ryan’s selection, reporters found themselves having tedious conversation with ATA CEO/President Jay McAninch about nocks, vanes, points, shafts, inserts and arrow manufacturing – and explaining when arrows become taxable, and at what rate. Ironically it was the interviews themselves, rather than the questions asked, that best explained why a guy like Ryan was the lawmaker who would ultimately close the tax loopholes — loopholes that once threatened to send at least 25 archery manufacturing companies overseas. The job required an archer and tax expert like Congressman Ryan.

McAninch said Ryan grasped those nuances related to the application of the FET to arrows when first getting involved in 2001. Ryan then led bipartisan efforts that ultimately “leveled the playing field” and kept manufacturers like Jas. D. Easton Inc. and its 250-plus employees working in Salt Lake City. The crisis facing U.S. arrow companies was evident in the 400 percent increase in imports in the three years preceding Ryan’s work.

“Most lawmakers know little about our industry and even less about arrow components,” said McAninch. “So it was difficult to comprehend how foreign-based companies could avoid paying the FET. That loophole gave some companies a 12.4 percent competitive advantage over companies manufacturing arrows here at home using American workers.”

In March 2003, James L. Easton, CEO of Jas. D. Easton Inc., joined an ATA contingent to visit lawmakers in Washington, D.C. The group outlined the dire need to reform archery FET by making foreign arrow manufacturers pay the same tax as American manufactures. During meetings with Ryan and other lawmakers, Easton explained why his company had begun investigating offshore manufacturing options.

Greg Easton, president of Jas. D. Easton Inc., credits Ryan for listening to his father. “Congressman Ryan closed the loophole that let foreign-manufactured goods avoid the excise tax,” Easton said. “That loophole put domestic manufacturers at a significant disadvantage. By fixing the loophole and assuring all arrows sold in the United States were subject to the tax, Congressman Ryan helped Easton keep our manufacturing jobs at home.”

McAninch thinks some people have underestimated the impact of Congressman Ryan’s work on the FET, but that doesn’t include the hundreds of manufacturers and thousands of archery dealers whose livelihoods are tied to archery and bowhunting.

“Archery is largely American-based, and Paul Ryan and the bipartisan support he garnered for his bill made sure it stayed that way,” McAninch said. “His bill eventually passed the House and Senate by unanimous consent. No one from either party opposed it.”

One lawmaker aiding that bipartisan effort was Rep. Mike Thompson, D-Calif. When addressing the ATA Board of Directors in June 2012 in Washington, D.C., Thompson said: “I’m for doing everything we can here at home for our workers and manufacturers. Foreign trade is important because our small world is getting smaller every day, but we can’t cut domestic business in favor of foreign business. That effort requires work on both sides of the aisle. Democrats want fair trade, not free trade. We dislike policies that put U.S. workers at risk.”

McAninch said Ryan’s FET reform also won support from state wildlife agencies nationwide because it ensured solid, reliable, long-term funding for the state’s conservation programs through the Pittman-Robertson Federal Aid in Wildlife Restoration Act.

“Some people assume the archery industry was simply trying to get a tax break by seeking FET reforms,” McAninch said. “In actuality, Congressman Ryan solidified the industry’s FET contributions to the Pittman-Robertson and kept them growing.”

In fact, in 2004, the year Ryan’s reforms took effect, FET paid by the industry on arrow shafts and components provided $6.2 million in revenue for conservation, a record high at the time. The industry’s FET total reached $10.2 million in 2011, a 64.5 percent increase. Further, through the first half of 2012, the industry’s FET total was $5.1 million.

John Frampton served as director of South Carolina’s Department of Natural Resources for nine of his 38 years at the agency, including the years some companies avoided the archery FET. He recalls Ryan working with the ATA and the Association of Fish & Wildlife Agencies (AFWA) to ensure conservation funding remained strong.

“The key thing people should know is that both the ATA and AFWA supported the changes Ryan engineered,” Frampton said. “Archery’s continued contributions to Pittman-Robertson were in jeopardy until Congressman Ryan helped close that FET loophole. He knew the importance of Pittman-Robertson to the states’ conservation programs. Archery’s P-R contributions are stronger than ever, thanks to Paul Ryan.”

Even so, the FET reforms didn’t happen in one Congressional session. They required continued work between lawmakers, the ATA and AFWA over several years. By 2003 there was widespread consensus to fix the FET, but the amendment was attached to bills that failed to pass either the House or Senate or they died in the conference committee.

Finally, in October 2004, Congress passed the American Jobs Creation Act and President George W. Bush signed it. The bill amended three FET provisions on archery sales:

  1. It imposed a 12 percent FET on all arrows sold in the United States by a manufacturer, producer or importer.
  2. It reduced the FET from 12.4 percent to 11 percent on the sale of broadheads by manufacturers, producers and importers.
  3. It removed the 11 percent FET on bows drawing less than 30 pounds.

In November 2004, the U.S. Treasury Department (IRS) ruled that, while the loophole was closed, the tax burden had been inadvertently shifted to retailers. This was an unintended yet unacceptable outcome.  The ruling led the ATA and Congressman Ryan to craft an alternative tax provision. The Joint Tax Committee worked with the Treasury Department, and the House Ways and Means and Senate Finance committees, to resolve the issue. This resulted in a flat tax of 39 cents on the first sale of each arrow shaft, regardless of whether any components were attached.

On December 7, 2004, the House passed the bill and the Senate followed the next day. President Bush signed the bill soon after. The law provided for future adjustments to the 39-cent flat tax on shafts using the Consumer Price Index (CPI), which insured annual cost-of-living adjustment were made. By 2012, the FET on shafts reached 46 cents.

Image courtesy Archery Trade Association

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