Clinton Drops Plans to Impose Job Training Tax, Officials Say

Faced with stiff opposition from business groups, President Clinton has virtually abandoned a controversial plan to impose a new 1.5% payroll tax on U.S. firms to fund job training and retraining, according to Administration officials.

The training-tax proposal, a cornerstone of Clinton’s economic agenda during last year’s presidential campaign, has been shelved by Labor Secretary Robert B. Reich, officials of his department said.

Reich had suggested during last winter’s presidential transition that he was uncertain about the tax’s fate. But it is now clear that the idea has been quietly dropped from the Administration’s agenda.

The decision to place the training tax on the back burner comes as the Labor Department has delayed plans to propose a $1 increase in the nation’s minimum wage, which is $4.25 an hour.

That proposed hike was opposed by the business community, which warned that such a steep increase would quickly curb the ability of small businesses to create entry-level jobs.

Reich, a close friend of Clinton and a longtime lecturer on political economics at Harvard University’s Kennedy School of Government, was the architect of Clinton’s economic agenda during last year’s campaign.

But labor experts close to Reich said he was never an ardent supporter of the training tax.

Instead, they said, the tax was backed by another longtime Clinton friend, Ira Magaziner, a former business consultant who is now directing the White House task force on health care reform.

Relations between Reich and Magaziner, who co-authored a book on economic policy in the early 1980s, reportedly have chilled as they have jockeyed for position and influence within the Clinton camp.

The training tax proposed by Clinton during the campaign would have required firms to spend 1.5% of their payroll on training for their own workers or pay an equivalent amount in taxes into a national fund that would have been used to support job training and retraining programs.

Clinton’s campaign advisers argued that the proposal would give firms an incentive to increase their own in-house training programs to avoid paying the tax.

But after Reich had been tapped by Clinton to become labor secretary, he told an audience at the Kennedy School of Government that he had reservations about the training tax.

Since he has taken office, he has focused on ways to expand federal funding for training and job apprenticeship programs in ways that would not require another tax on businesses.