NRF LEADERSHIP GATHERING MULLS BANKRUPTCY REFORM
Byline: Joyce Barrett
WASHINGTON — Retailers meeting here for the National Retail Federation’s Leadership Conference had bankruptcy reform, trade and taxes on their minds.
Gathered in the historic Willard Inter-Continental Hotel on Tuesday, the retail executives heard from Congressional Republicans and Democrats about the agenda for the remainder of 1998.
Attending the conference were such executives as Arthur Martinez, chairman and chief executive officer of Sears, Roebuck and NRF chairman; James Oesterreicher, chairman and ceo of J.C. Penney Co.; Richard Sharp, chairman and ceo of Circuit City Stores; Peter Starrett, president of Warner Bros. Studio Stores; Michael S. Modell, president of Modell’s Sporting Goods, and Gordon Segal, president and ceo of Crate & Barrel.
Suffering billions of dollars in losses to bankruptcy claims, retailers see this year as their best chance at substantial reform that would make it tougher for consumers who seek bankruptcy protection to shirk their debts if they are capable of paying a portion.
Orrin Hatch (R., Utah), chairman of the Senate Judiciary Committee, which two weeks ago advanced its reform version to the full Senate for consideration, told retailers that he wanted the Senate to move first on its bill to give the House momentum. The House bill was pulled from consideration two weeks ago.
Hatch challenged the retail community to build support for bankruptcy reform on the local level. “You can play a major role in seeing that it is considered,” he said.
Hatch also warned that Sen. Edward Kennedy (D., Mass.), could seek to attach a $1 minimum wage increase to the bankruptcy bill. A Kennedy spokesman said that was a “distinct possibility,” and predicted the bill could come before the Senate shortly after the July Fourth holiday.
Martinez said in an interview that bankruptcy reform was critical to the industry, despite what he has observed as a recent slowdown in filings. “With bankruptcy reform, those who file for bankruptcy out of convenience will find it more difficult to avoid their debts,” he said. “At the same time, it will still assist those who find it impossible to repay their debts because of circumstances.”
On China’s most-favored-nation trade status, Senate Democratic leader Thomas Daschle of South Dakota as well as Hatch expressed support for the policy, but acknowledged congressional criticism is mounting, especially in the House.
China’s trade privileges have become increasingly problematic as questions are raised on Capitol Hill about satellite exports to China. Charges have been leveled that the technology transfer could jeopardize U.S. security.
Daschle told retailers that the vote on China’s trade status should be a “rational not political decision,” and that revoking it would be “exactly the wrong thing to do.”
Hatch, asked about China’s trade standing by reporters after his remarks to the retailers, said its status was “getting queasy.” He said, “I believe in the final analysis we will have to approve it, but there is no question that MFN has many aspects that can be criticized this year.”
On another trade matter, Daschle told the assembly that Clinton’s request for fast-track negotiating authority would likely be approved by Congress next year. The fast-track effort was stymied in the House in 1997 for lack of support. The Senate is another matter, Daschle said, noting that there were 65 votes for fast track last year. On the thorny issue of whether to make labor and environmental protections a negotiable point, Daschle was optimistic that a compromise could be found between many Democrats who insist on labor and environmental protections, and Republicans who object.
On tax reform, Hatch said there would be “a significant tax bill” this year that would probably continue reductions in the capital gains tax started last year. Hatch also endorsed an industry-backed plan to eliminate the estate tax, which is levied on family-owned businesses when a principal dies.
Sen. Kay Bailey Hutchison (R., Tex.) told the group that major tax reform, however, would be considered after the next presidential election in 2000. “The present tax system still needs a lot of work,” she said. “In the long run, our goal is to give American taxpayers a simpler, fairer system.”
In afternoon visits to Capitol Hill, retailers argued against proposals to replace the current tax system with a consumption tax. Retailers also urged that a repeal of the lower of cost or market inventory accounting method (LCM), which was included in President Clinton’s fiscal 1999 budget, be rejected. LCM permits retailers to write down their inventories at the time the value of the goods drop, either because a newer product has been introduced or the old product has been permanently put on sale. If repealed, retailers would not be able to deduct the lost value until the goods are finally sold or they are determined to be worthless.
Retailers also urged lawmakers to extend the Work Opportunity Tax credit, which expires July 1. The credit gives employers a tax break on salaries paid to certain categories of low-skilled or disadvantaged employees.