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4 Federal Tax Policy Memo 1 (1980)

handle is hein.tera/fetxcyemo0004 and id is 1 raw text is: TAX  FOUNDATION'S

January  25, 1980                 VOL. 4   NO. I
BUSINESS TAX POLICY -- HOW UNIFORM SHOULD IT BE?
We go into the 1980s with a sense of movement on basic tax reform affecting
capital formation and the business sector. The stage was set in part by the Revenue
Act of 1978 which departed drastically from the character of tax legislation in the
preceding decade. This momentum was built upon in 1979 with the development of sub-
stantial support for a thorough overhaul and liberalization of depreciation policy,
embodied in the 10-5-3 proposal of Congressmen Jones and Conable. This has wide-
spread backing in the business community as the top capital formation priority for
the next round of general tax legislation. Whether such legislation evolves in 1980
is questionable. But if not, the 97th Congress surely will be dealing with
capital recovery issues. There probably also will be a continuing push to reduce
the corporate income tax rate structure itself and perhaps even another attempt to
relieve the double taxation of corporate earnings.
These broad issues affect businesses of all types and sizes. In fact, one
of the arguments of the proponents of tie Jones-Conable capital recovery bill is
that it would benefit capital-intensive firms of all sizes and has the active sup-
port of important segments of the small business community as well as the major
business and trade organizations.
Along with this movement on capital formation there has been a companion
drive to grant more tax relief specifically to the small business sector. Changes
have been made in the corporate rate structure raising the surtax exemption level
to $100,000 with graduated rates beneath it. The 1976 Tax Reform Act significantly
eased the estate tax burden on small business. Other actions taken in recent years
have provided targeted tax relief for small business including liberalization of
Subchapter S allowing certain corporations to elect to be taxed as partnerships,
the application of the investment credit to the first $100,000 of used equipment,
and a temporary jobs credit up to $100,000 per firm for incremental hiring.
Small business interests have growing political clout. In recent years they
have been promoted aggressively by Washington-based organizations using quite so-
phisticated public affairs programs and communications techniques. Many small
businessmen are extremely effective lobbyists in their own right, articulate and
often better positioned politically in the Congressional districts across the
country than regional managers of large companies. The Small Business Committees
in Congress also have become more active in recent times pushing tax relief and
other measures to benefit the small business community.
All this came to a crescendo of sorts with last week's White House Confer-
ence on Small Business, a much publicized meeting of about two thousand small
business delegates mapping their public policy objectives for the 1980s. The Con-
ference came up with a list of fifteen priority objectives of which at least six
called for tax policy chan,-s. The most important of the latter were:

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