RETAILERS CHEER GOP CONGRESS; MILLS NOT SO SURE
Byline: Joyce Barrett
WASHINGTON — As the first Republican-controlled Congress in 40 years convened, retailers welcomed it as business-oriented and consumer friendly.
But textile industry representatives feared that much-touted spending cuts would decimate their research centers and questioned the direction trade policy would take. Apparel industry representatives, meanwhile, are reserving judgment.
“This is a taxpayer-friendly, retail-friendly Congress,” said John Dill, senior vice president of government affairs for the National Retail Federation. “It will move in a variety of areas that will be good for retail — less regulations, less taxes, less government spending. That is all good news for the industry.”
Larry Martin, president of the American Apparel Manufacturers Association, said it was difficult to predict what direction the new Congress would take, but noted, “It will be more business-friendly.”
The centerpiece of the new congressional agenda is a 10-point “Contract With America” devised by new House Speaker Newt Gingrich (R., Ga.) that includes tax changes and regulatory reform and calls for balancing the federal budget and tougher penalties against criminals. While House Republicans have promised to bring each element of the package up for votes in the next 100 days, and even began voting on parts of it Wednesday afternoon, Gingrich acknowledged in his debut as House Speaker that it would not be easy to see the contract into law.
Because House Republican leadership has asked the business community to support the contract effort, the NRF is currently polling its membership on the package.
Only five of the contract items could affect the industry, according to the NRF. The first item, the balanced budget amendment that would limit federal spending to its receipts, could put additional economic pressures on states to fund programs abandoned by the federal government. This could force states to raise their taxes, and in turn could take money out of consumers’ pocketbooks, Dill said.
The second item, called the Taking Back Our Streets Act, would, among other things, institute mandatory victim restitution, which could require shoplifters to reimburse stores for stolen merchandise.
The third provision would reform U.S. tax law by providing a $500-per-child tax credit for families with incomes up to $200,000, reform the marriage penalty and provide for tax-deductible individual retirement accounts.
The exemption for children is another provision that could put money in consumers’ wallets, but, on the other hand, expanding IRAs could result in less consumer spending. The IRAs could have a positive impact, however, by deflating arguments for a consumption-based tax system to encourage savings that have been put forth by leading House Republicans, including Rep. Bill Archer (R., Tex.), new chairman of the House Ways and Means Committee.
“Retailers aren’t supportive of any major tax change,” Dill said. Members of the NRF’s tax committee had a chance Dec. 5 to voice their opposition to consumption taxes when Archer spoke to the group. “We had a good back-and-forth conversation with him,” said Tracy Mullin, NRF president. “We’ve had a close working relationship with Mr. Archer for years and we expect that to continue.”
While Republicans toy with tax reform, retailers are most concerned about keeping the deficit under control. “We don’t want interest rates to go up and consumer confidence to go down,” Dill said. “We want to ensure that whatever is done is thought through completely and carefully.”
Another item in the GOP contract that could influence retailing is the Job Creation and Wage Enhancement Act, which would provide a 50 percent capital gains tax rate cut, increase the estate tax exemption from $600,000 to $750,000 and implement far-reaching regulatory reform.
Changes in the estate tax exemption could make it cheaper for small store owners to pass on their businesses to their heirs, Dill said. The industry also favors regulatory reform, especially plans to overhaul employer mandates by the Occupational Safety and Health Administration and enforcement procedures by the Consumer Product Safety Commission.
The final item that could affect retailers is a proposed increase in earnings allowed senior citizens before they begin to lose Social Security benefits. Because the retail industry has often hired experienced senior citizens who are often inclined to work more, this could open up more opportunities for employment.
Upcoming spending cuts are concerning the textile industry.
Senate Budget Committee Chairman Pete Domenici (R., N.M.), has said that up to 100 federally funded programs could go as the GOP looks for money to fund its tax reforms. While no programs have been mentioned specifically, the Textile Clothing Technology Corp., based in Raleigh, N.C., fears its $3.4 million in federal money could be cut. Representing 40 percent of its yearly budget, that reduction could be fatal to the research center, said Auggie Tantillo, former chairman of the Committee on the Implementation of Textile Agreements under the Bush administration and now a Washington representative for several textile groups.
“Anyone with an earmarked program is up for grabs,” Tantillo said. “I don’t see TC2 as a high target item, but it’s the type of thing that someone could question because it’s helping a private industry.”
Ron Sorini, former textile negotiator for the Bush administration and now a senior vice president with Fruit of the Loom, said, however, the Republican Congress will be generally good for the textile industry, because it will restructure tax laws, expand tax credits for industrial investment in the U.S. and take its time in considering new trade policies.
The GOP “Contract With America” also is likely to delay any immediate consideration of pending trade issues, which could include a request for fast-track extension and a proposal to broaden trade benefits to the Caribbean.
China’s trade status also could be in question again this year, predicted Robert Hall, vice president and government affairs counsel for NRF. Hall is concerned that Sen. Jesse Helms (R., N.C.), new chairman of the Senate Foreign Relations Committee and a friend of the textile industry, could attempt to repeal China’s Most Favored Nation status because of recent disputes with the U.S. over intellectual property rights.