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![handle is hein.tera/taxfeaturs0015 and id is 1 raw text is: Special 22nd National Tax Conference Issue
MONTHLY TAX FEATURES
Copiyright 1971 by' Tax Foundalion, Inc., SO Rocefecller Plaza, Newv York. N. Y'. 10020
Bennett Honored By TF
Tax Foundation, Inc.'s annual Award for Dlistinguihed I'ublic
Sctr ice Is presented I Senator Wallace F. lennett of Utah at the
research orginitit nt's 33rd -intunl dinner. Admiral W. J. McNeil
(right) Foundation l'resident, Iresents the award as Algcr It. Chap.
ma. IllOtiltitin Chlrlni, looks otn.
Bennett Gets
Predkts No 1i
'IT' Iikelihood of substantial
risitile--hasl'isg snie unexpecte
hiinett of Utah, ranking 'lil
nlittee, declared in asn ttlsess to
ier it New York City.
Prior to his address, Sen. Bel.
s'ilt swas pliese/ited ieitli ihe
Foiln1dallonl's annulal Awvard for
listinguishled Publc Service ty
Adiral IW. .1. McNel, Fonnda.
lt iU Pleslt'ut irevious awasd
;cipini% hiluhde lPesihent Her-
h i H om er, D i gh'1It ). r isen.
hItower, Seii. II;irry F. Ityid, Wil.
hain MaC. Matlit aid Arthur
' ttle will he 11i inlease it
tax5es. the spleaker said, despise
ltie lit oltk for : %ety lage I de-
firit in it' F'deial budget for
fiscal 1971. The Sesiattr tlded:
..e. the' is nndeistandable re-
[lcltiallts (h y. oih the Adminis.
Iratiu and the cosigrcss Ito
Invation Hits Cpital
Fgrmation Incentives
M hdification of the nation's
tax lass ae needed now%, Richard
G. Walker told attendees at Tax
Foundation's 22nd National Tax
Conference, because pIesent.in.
cs'''tives to capital formation are
either weakened nr completely
Offset Ihy te fosces of inflation.
Mr. Walker, setior partner,
As tltr Andeisen and Co., New
Vork Cily, proposed legislation
along these liles to elinunate or
leduce sith deterrent effects of
itflation and It, improve U. S.
Cnompanies' competitive ivsstion
vs. folcgn ctiirerlts: ) in.
ru ase tule rate of arcelerlltin
tndlr thi declining lalanre
nielhod; (21 use ite iivestluieti
cirdit its i inc'ntive to capital
fointaliou and a ahier signii.
cast offset In iiflatlon (3) vary
calpital gains lax rales wih ite
rale of inflantion, ie holdiug
lies I and the legree of gain or
As asn ahernate aplproach, Mr.
Walker said diere is need to
sltais a tax ereeiatin system
and a s)stin for ieasurihg cap.
ihal gains where capital invest.
Iniet are tieasisned in rial terns,
ihs elihinating ile effective
sli inkinig of tax deductions which
sei art' n1osw expetriencihg and
itl se' ass' tsyitit to correct
Iy, asking for larger fractions of
a declhinig hase.
TF A wardi
rx Increase
iew tax increases it 1971 is quite
d einergecsy-Senator Wallace F.
lican on the Senate Fiiance Cost-
Fax Foundatios's 33rd annial din.
incease taxes in a period wten
the economy is nt operating at
ft If capacity.
The Senator predicted that if
she econinmy resunes its growth
at fairly high nlsiplo)nicsnt levels,
revenues frois the presenu tax
system sould grosw about $15
hillion earh year.
Accorligly, over the long
run, lie sail, if tie call have
reasotable success in holding the
line otn expenditures, We can
hlope to Ialanee ste budget with-
Out any mtajor tax adjustments.
In fact. with tight expenditure
rostrol, it might be ptssible to
have significant tax reductions,
for example, in she indiidual
income taxes.
Biegel: Act Created
'Wonderland World'
Contrasting rulings on deferred
compensation for executives be-
fore and after the Tax Reforms
Act of 1969, Hernmas C. Iliegel
told attendees at Tax Founda.
tion's 22nd National Tax Con-
ference:
You could draft a plan and
atuicipate lite tax coueeuences
[bt] now we 're In a whole
Alice-in-Wonderland world, W'e
have a iaxium lax on earned
income, a special 10 iercent tax
ons lax preference income, the
interplay of tax preference il.
coie on earred icoe, te
splis-sreatuint of limit sin dis-
tihtihtis biwecen ( al gain
aid other icoie, %ith a cosl-
plicated avesagihg device ..
Mr. Iliegel, a paruser i ihe
Washington law fimi of Iec,
Tootiey and Kent, said lie be-
lieved that for the titte heing,
deferred plans for groups of em-
loyces will not he possible,
becaise of In variables.
lie said lie foresaw a reversion
to large increases in direct cash
rompensation with the executive
offeled [Ite chance to invest the
halauce as lie sees fit.
Sossie employers, lie said, are
going to start a cafeteria op.
iroach: adollisng not nne ilan,
hstt a number of plans, anl let-
ling Ithe employees pick and
choose. My own feeling, lie
Tax Fouudaton's 22nd
Nathutal Tax Conferenee
I.s New York City, Dec. 1,
hall as Ils theme The
Shlftilg Tax lurdents Im-
plicnllons foe Capital In.
Veostmsenl. TF' 33rd ass.
nialh Ihiner was held oit
ihe ane ale. This MTF
I. based on Conference
asi rlldner Ioplcs. I'rocaed-
iugs, eolnlhllln Confer-
alie a pera anld d lectlslon,
i h available early in
197).
Depreciation
Reform Urged
Repeal of the investment
credit, ihe rising cost of reilac.
ing and maintaiaing a given level
of real net new investment-
along with higher interest rates
-wre cited as factors weighing
in on the side of depreciation tax
policy reform at Tax Fotide.
tlons 22nd National Tax Con.
fereie.
Richard E. Slitor, Assistant
Director, Office of Tax Analysis,
U.S. Treasury Department, a
speaker at the afternoon session
of the all-day New York City
oeeting, said:
The investnment credit repenl
has left a gap in the capital re-
covery structure. Inflation has
raised. the cost of replacement
and maintaistng a given level of
'real' net new investment. lighcr
interest rate. have been part ...
of the infla:hon.cooling proce-
diire...
lie added: And though there
has been easing of the tionelar'
restraints, they still exert heavy
pressure, along wilth inflation
and site removal of the invest.
nisent credit, on the financing of
new produetive facilities.
Same Depreciable Life
Future depreciation proce.
dutres, said Mr. Slitor, should
get away frot the identification
of cconsoitic anI physical [asset]
life which leads to overdif.
ferentiation of such ises among
taxpayers. This is often based on
tie erroneous belief that an
ostmoded and repair-rilddled
machine is still a valuable asset
just because soneone continues
to sie it, said site speaker. Ve
should recognize that there is a
case for giving all taxpayers the
same depreciable life on a given
class of assets.
Depreciation policy, Mr. Slitor
noted, is not merely a matter of
throwing out big cash benefits
for business. Rather, it is a sc-
entific technique of helping a
vital sector of oir economiy func-
lion with a miniium of impair-
iest associated wilh carrying
the personal and bsisess tax
burdens we need to meet otr
commitments and attain our no-
tlonal objecti'es.
added, is lids is not in the best
interest of the employee.
Its his address, Mr. Biegel ex-
plained and illustrated these
principal changes made by the
1969 Act whhic affected execu.
itve compensation: (1) new
moaxim tax rote on earned in-
come; (2) tie new tax on so-
called preferential items; (3)
new rules on restricted property;
(4f) new methods of taxing limp
suin dlstribuitions from qualified
plans and (5) changes in the
capital gains rates.
Say Change Was Pressed
To Aid Faster Write-Offs
Declaring that changes in the present delneciaion systei in the
Federal tax law are urgently needed, Roger Milliken. Pesidtnt of
Deering Milliken Inc., revealed for the first time, at lax Foula.
tion, Inc. s 22nd National Tax Conference, that a Presidential Task
Force had recosssended a major increase itt corpoeation dti'rerl.
ation alloantces for mnachi nery
Sees W ayMr. Milliken, head of the
Spartanbul , S.C. textile ntu.
Cut ax oad faolring noted ,that lite
Cut Tax Load a c on Ilusness Taxa
lion report subitted last Aluil
Rcdu tion of, and possibly the had never before been dcsc5 ited
elitination o, tle gross e n- to ' atudience.
elualities in taxatIotu's effective
weight on income froms capital ('he reiort sas nade pattic
can be accomplished ii two ways, by a \hite Iouse spoitesmtanl
according to Dr. Arnold C. 1car- the day after tile /'ax Confer-
berger, Chairman of the Depart- ence in New York City).
ssent of Economics at the Utd- 'Tle report, noted Mr. Mili.
versity of Chicago. ken, said depreciatin I tiles
Addressing attendees at Tax changes are needed to (I) tu.
Foundation, Inc's., 22nd Na- courage expansion and mod-
tional Tax Conference on how erniation of production facilities
the nation's tax system should to sustain and accelerate tcal
evolve, Dr. Ilarherger said that cconstnic growth; (2) Itt ittg
one of the live ways would le to U.S. tax Ireaitlent of itvt'stest
eliminate special taxation of in- in prodection facilities tieat'r
coliie frot capital. the other by those of otlher major indgisttial
trying to equalize the effective nations; and (31) moderate and
weight of such taxation among cope with the adverse effects of
economic activities. inflation ott the real vale (tf
Elimination, lie declared, cost recover)' allowance.
could entail integratisig the car. Reconmiended was the ie.
poraion and personal income placemett of tile lnesett drlet.
taxes ... Alternatively, it could ciation systeint y a simpliftied
be accosmplished by shifting from system of cost ecovery allow.
corporation income taxation to anes, aid that cut t,colsve )
valie-added taxation. periods assigned to nlachliae'v
Ois the other hand, if the aim and equipnsst groupied accord.
was t, make tile la.N's %%eight ing tn tilt peseit gtithflints Ib'
approxlnsatcly equal for all sec. reduced under te rpoilststd Iap.
tors, this could le acconiplished, ital cost tecoer)' systenm Iy it)
lie said, by corporate-personal no percent. Two limitatios imtill
cole tax integration together apply, said Mr. Milliken: ni
with a preferential tax treatment guideline petilds (,f five Seats i
of income front labor serviees. less would hr iled.I anid gtil.
,/he speaker said lie had to line periods of iiow than tite
einter his demrrer agaihnst the yeats would not l, itduri it,
exaggerated claimts for the less than five.
value-added sax. Some of its pro. The Task Folce also ern-
lioiens, lie toted, feel tie value mended siitllifyiig the i'Xstig
atleled tax will revitalize the lows by giving tle St. ret v ,tf
doittestic econoi y activate do. tie Treasuiy autlstritv It, nidd-
mesIic investment, stimulate ex. fy pr'seuIl gnidlhnv assivling
ports and improve ilie balance each grou of .ssets a stalidaitS
of payttiels.'' cost recovery p.rid -- w 1t.i!
Alitongh a Lug-tihle propon, reference to a% eraeo tful life
ent himself, said Dr. Ilarlcrger, of ihe pra irtv tit tile itliott.
ie does not feel that the value. and eliiinatinig'she sese l' i atto
added lax is likely toIn d any of test wih tisiet it, existin g anit
these things. futie facilities.
Passer: Economy to Grow 4.3% in '70's
Ass estiniate that during tite I)r, Passer said that eie'titis
remainder of the 1970's, the na. of ste ulanned detnand for call.
tiot's econonmy will grow at ital fuids (for housing and u'lter
about 4.3 percent per year, high. needs) ant an increase of the
cr than the real growth rate supply of savins (in part
since 1917 (4 percent), and through tle Fedleral govern.
considerably higher than tite 3 ntent's achieving hudget sot-
percent per year during the past pluses) will he necessary it the
,10 years, was given attendees at 1970's since, ie estinated, the
Tax Fotndation's 22nd National planned denand for funtts is
Tax Conference. likely to exceed the planned sup.
Dr. Harold C. Passer, Assis. ply of funds.
tant Scercay of Conmerce for _
Economic Affaits, speaking ott A new 61ltinge Tax Fond,.
Capital Needs and te Out. liot altld Deprcciallon Al.
look for the Futre' at tle New lowastes, (Itseuurh I'nbli.
York City all-day session addi. tin No. 21) nneutrisrasev the
tionally forecast: need fore a re-evanlsjiafi of
''Major dollar aggregates stuch tax depeciatint policies in
as Gross National Product will the light of rntinuing in/Ia
increase another 1.5 percent to tiou,. repeal of the investnt
2.5 percent hecause of rising tax credit and high copitol re.
prices . . . a rate of price it. placemeit roIts. The Idily
crease in the range of 1.5 to 2.5 froulei barhgosSS l ur*
r e n t it r b l eo w a n d it rot er i i ll
percent per year would reflect 1eal tax cle iatinn polio'
as essentially stable situation. and s one of the ecronomir
To achieve this pattern of eco. as/pects to he con.4dered.
nonsic growth, said Dr. Passer, Single ropies (Sf Deprrie.
Ithe natton nst follow a mod- ton Allowancrs tttilthlt ,d
crate but steady and evenhand. the J osudalio. O0 I ulue.
ed monetary policy, with a feller Plw. Newt 'alah . VI'.
strong measure of fiscal respon. 10020, are $1.30. A 12 png,.
sbility. .smmnary ii free.
January 1971
Vol. 15, No.1](ViewImageLocal?handle=hein.tera/taxfeaturs0015&div=1&collection=&method=preview&ext=.png&size=3)