President Carter's new package to boost industry and the economy will include incentives for business investment and exports and could well reduce personal taxes to offset at least partially the impact of Social Security tax increases next January, sources said yesterday.
The policy will contain both broad measures to raise economic growth generally and other elements tailored to the needs of specific industries, the sources said. It will stress the need for government-industry cooperation to anticipate problems and prepare for them, rather than reacting to industrial crises.
The package will be oriented primarily towards industry and investment but almost certainly will contain some cut in personal taxes, the sources said. b
Increased depreciation allowances for industry are the main option for tax cuts aimed at stimulating business investment. Other options for industrywide incentives are being looked at by the administration, but the policy will not include any cut in corporate tax rates the sources said.
Although work on the policy statement is "far advanced," there are still many key decisions to be made, the sources added. The statement will outline measures for the fiscal years 1981 and 1982.
The announcement of the new reindustrialization package will come "sooner rather than later," the sources said. This probably means close to Labor Day, the traditonal start of the election campaign. The president has yet to decide on the precise timing of the unveiling of the policy, and he will probably be concerned to get maximum politcal advantage from the announcement, the sources said. But it is virtually certain he will wait until after the Democratic convention, which begins on Monday.
The tax cuts in the package would be recommended for enactment next year, probably in the spring. But the proposed business tax cuts probably would be made retroactive to Jan. 1, 1981, the sources said. Individuals may not be so lucky: The personal element in the tax package may well not be backdated to the start of the year, they said.
The administration's proposals for personal tax cuts will be much more favorable to the lower-income persons than the 10 percent across-the-board tax cut advocated by Republican presidential candidate Ronald Reagan, the sources said.
An across-the-board cut is "regressive," giving larger tax reductions to richer individuals than to those in the lower income brackets, while Carter's personal tax-cut measures would be "much more progressive," they said.
A link between Social Security tax payments and tax cuts is the most likely candidate for reducing the burden of personal taxation, but no final decision has been made yet, the sources said. The so-called "marriage penalty," by which two-earner married couples pay more total-taxes than they would if they were single, is also beinglooked at, they added.
The administration measures would be "much less expensive" than Reagan's proposals, the sources also said. The cost in fiscal 1981 wold be less than $30 billion, partly because the taxcuts would not go into effect until several months into the fiscal year.
But the policy would have a significant cost next year, which would increase the federal budget deficit, the sources confirmed. The cost would increase in fiscal 1982, but it would not reach anything near the level of the Reagan proposals, they contended. Administration estimates put the eventual cost of the Reagan plan at $220 billion a year by 1985 for the personal tax cuts and about $60 billion for business tax cuts. The administration's program will tilt the balance more in industry's favor, the sources said.
Carter's statement will define for the first time an administration's view of an "industrial policy," they added.
The new tripartite committees set up for the steel and auto industries will continue, but the administration is concerned that it should help boost all industrial investment, because it does not want to get into a game of trying to pick winners and losers, the sources said.
They suggested that there could be cooperation between the government and industry over such things as new regualtions. If industry were consulted before regulatory legislation were proposed, then the most cost-effective way of achieving the hoped-for results of the regulations might be determined in advance of legislation, they said.
The administration is also eager to stimulate research and development and encourage innovaton in industry, the sources said.