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Clinton’s Investment Credit Attacked With AM-Clinton-Economy, Bjt

March 31, 1993

WASHINGTON (AP) _ President Clinton’s proposed tax incentive for business investment in machinery was criticized Wednesday by some of the companies that would receive it.

Like the businessmen, the chief tax writer in the House, Rep. Dan Rostenkowski, D-Ill., expressed concern about the higher corporate tax rates that Clinton has recommended to pay for the incentive, known as the investment tax credit.

″I’m not too enthusiastic about increasing corporate rates,″ Rostenkowski said as the Ways and Means Committee, which he chairs, heard testimony about Clinton’s tax program.

Harry Sullivan, senior vice president of the Food Marketing Institute said: ″Abandon the temporary (investment tax credit) proposal - it has garnered no support in the corporate community - and leave the corporate rate at 34 percent,″ the current maximum.

He testified for the Tax Reform Action Coalition, a business group created to fight for lower tax rates even at the expense of special deductions, credits and other targeted tax breaks. The investment credit was one of the major provisions repealed in exchange for the lower rates enacted in 1986.

George W. Sydnor Jr., chairman of the National Association of Wholesaler- Distributors, agreed with Sullivan and called the proposed credit anemic. Sydnor, president of James McGraw Inc. of Richmond, urged that it be dropped and that corporate rates not be increased.

Clinton proposed restoring the investment credit to spur the economy. Under the plan, small businesses would get a 7 percent credit for equipment purchases before the end of 1994 and a permanent 5 percent credit after that. Other businesses could take a 7 percent credit for machinery bought before 1995, when the credit would expire.

Several members of Congress have been skeptical about the credit. Some say it would reward businesses for purchases they would make anyway. Other lawmakers say the money would be better spent reducing the federal deficit.

But Clinton has shown no indication of backing away from the credit.

″Treasury feels that the president’s investment package, including the investment tax credit, capital gains (reductions) and other provisions, will be a very effective spur to investment in this country,″ Treasury Department spokesman Jack DeVore said.

Bill McReynolds, a spokesman for the Chamber of Commerce, said that business group is checking its members nationwide to see whether they want the credit at the expense of higher rates. ″We are hearing that (many are skeptical),″ McReynolds said. ″We have to find out how prevalent that is.″

The credit was the main concern of businesses testifying at the hearing, but it was not the only tax issue. Among other witnesses:

-Goodwill Industries of America urged that a tax break for mainly wealthy contributors be restored. Its expiration last June 30 ″has produced a dramatic drop in ... donations (of appreciated property) from upper-income taxpayers,″ said Goodwill President David M. Cooney. The provision, strongly supported by museums and libraries, allows the 200,000 or taxpayers subject to the ″alternative minimum tax″ to deduct the full market value, rather than purchase price, of artwork, stock and other property that has grown in value.

-Friends of the Earth endorsed Clinton’s proposed tax on most fuels, saying it would penalize pollution and energy inefficiency.

-Several aluminum producers said their industry should be exempted from the energy tax, because most of their energy is used to make primary aluminum - not as a fuel. They noted, for example, that coal used to make coke and natural gas used to make fertilizer are exempt.

-Groups ranging from the American Legion to the Taco Bell urged restoration of the targeted-jobs tax credit, which expired last June. The credit, which Clinton supports, rewards businesses for hiring the disadvantaged.

-The hotel, restaurant and theater industries criticized Clinton’s proposal to reduce to 50 percent from 80 percent the portion of business meal and entertainment expenses that taxpayers pick up.

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