Corporate Carrots : Reich Proposes Tax Breaks for Good ‘Citizenship’

Labor Secretary Robert Reich proposed Tuesday that companies be rewarded with lower taxes or no tax bill at all in return for sharing more of their profits with workers, providing good health and pension benefits and helping retrain those who get laid off.

In a speech at the George Washington University Business School, Reich called for a “new era of corporate citizenship,” with companies focusing less single-mindedly on profits and more on the general welfare of their workers and communities.

The labor secretary, who has been the most outspoken liberal voice in the Clinton administration, said American companies now must do more because government will do less. Reich has often talked about declining paychecks and anxious workers, but a tax sweetener for businesses as a way to get them to treat workers better is a new proposal.

He also sounded a note of political retreat, a recognition of a dramatically changed legislative climate for an administration that just two years ago proposed a vast new program of universal health insurance.

Now, instead of the administration generating any new programs, the wave of budget cutting sweeping over Washington seems certain to cut into traditional job training, education and social welfare efforts.

Reich offered what he called a “modest proposal” for corporate tax breaks to stimulate a national debate on the proper moral and ethical role of business as government shrinks.

In today’s climate of payroll reductions and cost-cutting drives at major corporations, too often the “top executives are not creating value,” he said. “They are merely redistributing income from employees and their communities to shareholders.”

“As corporations have focused more and more exclusively on increasing shareholder returns,” he said, “the consequences have become more obvious. The stock market has soared while pink slips have proliferated, health care and pensions have been cut, and the paychecks of most employees have gone nowhere.”

Business leaders should embark on a new “era of corporate citizenship,” taking some of the burden the government has borne for the well-being of employees and communities.

Reich’s career as an economic commentator and, more recently, a Cabinet member, has been as an advocate of an activist federal government. His remarks Tuesday seemed to signal a major retreat from those liberal impulses.

“Regardless of how the current budget negotiations are settled, in the future the federal government will have a more modest role in safeguarding the economic security of Americans,” he said.

“States and localities may have more leeway, in principle, but far fewer resources,” he said. “And because they will compete with other states and locales to attract companies, they will be reluctant to impose higher taxes or any other extra burdens.”

Reich’s suggestion for a tax break hasn’t received any formal endorsement from President Clinton, but he has discussed the issue of corporate responsibility with the president, according to Labor Department officials.

Just as individuals or corporations can get deductions for making charitable contributions, Congress could change the tax code to reward businesses for other desirable behavior, Reich indicated.

Offering cases of good corporate citizens, Reich singled out Aaron Feuerstein, the owner of Malden Mills in Methuen, Mass., which burned down in a fire just after Christmas. Feuerstein pledged to pay the salaries and benefits of his 2,000 workers while rebuilding the mill.

Reich said Corning Inc. has a strong “commitment to employee participation and training” and has been recognized for providing a “family-friendly work environment. He also named Xerox, Chrysler and Republic Engineered Steels as other examples of “high-road companies.”