Byline: Joyce Barrett

WASHINGTON--Imports would be taxed 11 percent and profits on exports would be tax-exempt under a tax reform package, which was introduced Tuesday and immediately drew the ire of retailers and importers.
Introduced by Sen. Pete Domenici (R., N. Mex.), chairman of the Senate Budget Committee, and Sen. Sam Nunn (D., Ga.), the package is aimed at stimulating savings and investment. The tax on imports would be levied against businesses that have them in inventory.
As for a general tax rate for U.S. business, it would levy a flat 11 percent tax on gross profit. Businesses currently are taxed at about a 35 percent tax rate.
The package is not expected to see any action for at least a year, and it is one of several versions of tax reform that have been proposed on Capitol Hill. Others would levy a flat tax, a consumption tax, a value-added tax or would make changes in the current tax code.
"This smacks of protectionism, and it will be challenged," said Eugene Milosh, president of the American Association of Exporters and Importers. "It's inconsistent with GATT, because under GATT rules, we can't levy import taxes unless they are to help balance the current account, and then they can only be temporary."
John Dill, senior vice president of government and legal affairs at the National Retail Federation, predicted business would oppose it.
"Retailers would oppose anything that puts a tax on imports to benefit exports because that increase would be passed along to the American consumer," he said. "Retailers have opposed any type of tax that favors savings over consumption."
Gil Thurm, vice president of taxation and economic policy at the National Association of Manufacturers, said that a one-time deduction for capital investments would be an incentive to U.S. manufacturers to invest in their plants. He also said that domestic manufacturers would favor excluding profits from export sales because manufacturers now are disadvantaged in that they must pay U.S. taxes on profits and often then must pay value-added taxes to the countries to which they export.
In a Capitol Hill press conference held to introduce the measure, Nunn said the goal was to increase savings and investment rates while not increasing the current budget deficit. Domenici said the current tax code included "disincentives for American companies to compete in the world and to invest capital." --Fairchild News Service

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