Byline: Joyce Barrett
WASHINGTON — In an attempt to appease House Republicans, the Clinton administration has modified a proposed inventory tax change affecting retailers that has been conceived to help pay for the GATT Uruguay Round.
While the modification would lessen the impact of the initial proposal, retailers are still against it and have conveyed their opposition to House Republicans.
The administration had originally proposed a repeal of the tax deduction known as “the lower of cost or market” to raise about $550 million. It was part of an $11.5 billion package to offset the tariff revenue that would be lost during the first five years of GATT.
The modification would not repeal the tax deduction but would halve it. For example, retailers would be permitted to take a 50 percent deduction on the loss of an item before it is sold and then take the remaining 50 percent tax deduction after sale. The law currently in effectpermits retailers to take the entire deduction before the item is sold.
The inventory tax change emerged late last week as a major problem for House Republicans, who consider it an obstacle to securing passage of the GATT implementing legislation. Treasury Secretary Lloyd Bentsen met Monday evening with Rep. Bill Archer (R., Texas) to outline the new proposal. Archer could not be reached for comment Tuesday.
John Dill, senior vice president of government affairs at the National Retail Federation, said the modification was still not good enough to win retail support. “We think we’ve already paid for GATT by the decades-long imposition of tariffs and quotas on textiles apparel, and we shouldn’t have to pay again,” he said. NRF has worked diligently against the inventory tax change, despite its staunch support of the worldwide free trade agreement.
A Treasury Department official said the administration was continuing to work with House members to reach an agreement on the GATT implementing legislation. While House Ways and Means Committee acting chairman Sam Gibbons (D., Fla.) indicated late last week that he wanted to complete work on reconciling the House plan with the Senate’s this week, no meetings have so far been set for work to begin.
The modification would reduce the amount of money raised by the inventory tax change, but an administration source did not have specifics on what effect it would have.