Business Encouraged By Tax Bill Passage, Despite Bleak Outlook

Congressional action on a tax cut, a priority of the business community, moves to the Senate this week following House passage July 22 of a massive, $792 billion package that includes a 10% across-the-board reduction in the income-tax rate over the next 10 years. The Senate will debate a more moderate measure approved by its Finance Committee. The Republican leadership then hopes to reconcile the Senate and House versions and send a final compromise to President Clinton before Congress' August recess, slated to begin Aug. 7. Clinton, in turn, is expected to veto the bill, setting the stage for serious negotiations this fall as part of the larger budget debate. Although the House-passed measure likely won't survive the process in its entirety, it nevertheless is cheered by business groups. Besides the income-tax rate cut, it includes such other business-sought provisions as a multi-year expansion of the R&D tax credit, a phase-out of the Alternative Minimum tax and the so-called inheritance "death" tax, a lowering of the capital-gains tax rate, and simplification of international tax rules. "The bill's pro-growth provisions can ensure that projected surpluses will materialize," comments Michael Baroody, senior vice president of the National Coalition of Manufacturers, which led a coalition of business groups lobbying on behalf of tax relief. "If Congress and the White House are serious about future economic expansion, tax cuts are essential. What this plan really is about is an economic insurance policy."