Plan to Strengthen U.S. Trade Position Readied : Competitiveness: White House proposals may relax antitrust laws to shore up stance in global markets.
The White House is preparing a package of proposals intended to improve U.S. competitiveness in global markets, ranging from a relaxation of antitrust laws to new tax cuts to spur consumer saving and research and development.
The changes in antitrust laws would be designed to allow competing American firms to undertake joint manufacturing operations. U.S. firms have long sought permission to pool their manufacturing resources so they can better compete with large conglomerates from Japan and Southeast Asia.
Administration officials said that the plan, which still must win final approval by the President, is expected to be unveiled formally during the President’s annual State of the Union address to Congress, now scheduled for Jan. 30.
The proposals being considered also include:
--Tax measures designed to reduce business borrowing costs. These include making permanent the current 20% tax credit for research and experimentation, and also reducing taxes on capital gains as President Bush urged last year.
--Creation of a new tax-free savings account to help spur more saving by consumers, which in turn would make more money available for investment. The plan, disclosed previously, would enable most Americans to earn interest tax-free if they leave their money in for 10 years.
--Creation of a new agency within the Commerce Department to help U.S. corporations exploit commercial opportunities that may arise from the development of new technology. The move was authorized in the 1988 Omnibus Trade Act but never has gotten off the ground.
--Easing current restrictions on regional telephone companies to enable them to offer high-technology services and equipment that so far have been limited to long-distance carriers and foreign manufacturers. The idea would be to spur development of more high-tech products.
Although senior officials have been working on the components for months, not all of the elements have won final approval by the President. The Office of Management and Budget is opposing several elements as too costly or unnecessary.
However, proponents of a more-aggressive plan say that senior White House political strategists now are supporting the package as a means for Bush to appear more “activist” in his State of the Union address.
Administration officials said that final decisions on the plan are likely to be made within the next week and a half.
The notion of relaxing antitrust laws to allow two or more U.S. firms to begin joint manufacturing operations has been advocated for years by top Administration officials, first in the Ronald Reagan Administration and later in the Bush Cabinet.
Only last year, Commerce Secretary Robert A. Mosbacher cited such a move as a major priority. But the proposal was shelved because of opposition inside the Administration. Officials said that it is not clear whether Bush himself would sign off on the plan this time around.
U.S. firms have pushed for a relaxation of the prohibition against joint manufacturing. For example, firms interested in building and producing high-definition television equipment have argued that they need such a relaxation so they can catch up to the Japanese, who are far ahead in the potentially lucrative field.
Under current law, competing U.S. companies may share research and development efforts, but not manufacturing.
The plan for cutting capital gains taxes is a revamped version of one that Bush proposed last year, which was defeated in the Democratic-controlled Congress. The 1988 proposal would have reduced the tax rates for capital gains to 15% on most types of investments, down from the current rate of 28% to 33%.
This year’s version, which is certain to run into further opposition from Democrats in Congress, would offer a sliding scale depending on how long an asset was held. The lowest rate would be 19.6% for investments owned at least three years, with a rate of 25.2% for one-year investments and 22.4% for those held for two years. The latest plan would also expand the lower capital gains rate to include real estate.
Under the savings proposal, couples with annual incomes of up to $120,000 would be eligible to contribute as much as $5,000 a year to a special savings account. A single person would be eligible to contribute $2,500 if his income does not exceed $60,000.
The contributions would not receive a tax deduction, but the earnings would be tax free if held for at least 10 years and used to buy a house, pay family education costs, or cover medical expenses.
The proposal to make permanent the current tax credit for research and experimentation is intended to eliminate business uncertainty about the credit, which otherwise would expire at the end of 1990.
Separately, Administration officials said that Bush is likely to propose taxes on paper, glass, plastic and metals to encourage recycling. The proposal, which would require congressional approval, is expected to be part of Bush’s fiscal 1991 budget blueprint to be presented Jan. 29.
Bush has pledged repeatedly not to raise taxes, but he went along with several small tax measures last year and is expected to defend the new proposal as a “user fee” rather than a tax.
Last year, Congress approved a hefty tax of $5.6 billion over five years on the production of chloroflurocarbons, chemicals that destroy the ozone layer.
The aim of the new proposal on recycling, first reported in the Wall Street Journal on Wednesday, is designed to carry out Bush’s campaign promise to “make a national commitment to reduce waste by recycling and developing technologies that produce less waste.”
The plan also reflects an Administration approach that emphasizes reliance on economic incentives rather than strict regulation to promote environmental objectives.
As reported earlier, Bush is expected to propose more than $1 billion in fees aimed at reducing pollution. The pollution taxes are appealing, advocates say, for the dual virtues of raising money and helping to clean up the environment.
“Congress has accepted the notion of taxing pollution-causing activities,” a high-powered Washington lobbying firm said in a recent confidential report to clients. “The precedent has been established for initiatives such as an acid rain excise tax.”
Under the recycling plan, which has not yet been fleshed out fully, a per-ton tax would be imposed on various materials at the point of production. Bottlers, newspaper publishers and others who use recycled materials would then get a rebate from the fee.
In other budget developments, sources disclosed that Bush will ask for a slight boost in spending to fight AIDS, one of the few programs that is expected to receive increased funding.
Bush plans to ask for an extra $100 million, raising the federal government’s contribution to AIDS research and prevention to $1.7 billion.
On the other side of the equation, Bush is expected to ask lawmakers to cut the Low Income Home Energy Assistance Program, which helps the poor pay their heating bills, from $1.39 billion this year to $1.05 billion for fiscal 1991.
Staff writer Robert A. Rosenblatt contributed to this story.
